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KBE is best suited for investors looking to invest in the U.S. banking sector. After the sub-prime issues in fiscal 2008, the banking sector has recovered in spite of strict regulatory standards. The sector bounced back from a series of hedging losses and scandals. However, the ETF is sensitive to interest rate movement which functions in accordance with the Fed’s monetary policy. With the Fed raising rates, this ETF may outperform ahead. A rising interest rate scenario is profitable for the banks as this will increase banks’ net interest rate margin. Deregulation in the banking sector is another positive. However, a flattening yield curve which the U.S. economy is presently witnessing is negative for financial stocks. Occasional geopolitical concerns and the return of global growth worries may also put a cap on Treasury yields which can go against the fund.

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