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1 No-Brainer ETF to Buy in This Low Interest Rate Environment

Stock Markets1 hour ago (Apr 29, 2021 06:30PM ET)

(C) Reuters. 1 No-Brainer ETF to Buy in This Low Interest Rate Environment

The Financial Select Sector SPDR Fund (XLF) holds a portfolio of the top U.S. companies that are involved in financial services, insurance, banking, capital markets, mortgage real estate investment trusts, consumer finance, thrifts, and mortgage finance. The XLF fell to a long-term low in March 2020, but it recovered to a higher all-time high over the following year. Based on the Federal Reserves’ continued commitment to a low interest rate environment, we think the fund’s earnings will continue to be fueled and that continuing to bet on a diversified portfolio of financial stocks could be beneficial. Read on.

  • Free money for financial institutions
  • Rising long-term rates favor their matchbooks
  • A lesson from 2008
  • The trend is your friend- A digital economy supports the leaders for three reasons
  • XLF diversifies exposure- Attractive dividend and sustained earnings for the portfolio

Too big to fail became a mantra following the 2008 global financial crisis. Lehman Brothers failure, the forced takeover of Bear Stearns by JP Morgan, and government bailouts of the leading financial institutions was a watershed event. It led to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Stress testing, a whistleblower program, and limitations on speculative trading were the hallmarks of the Act. The Trump administration rolled back some of the Dodd-Frank Act, but many pieces remain in force. Banks profit from deposit base and preferential borrowing rates versus lending.

While the COVID-19 global pandemic created problems for the global economy, central bank liquidity and government stimulus created a bonanza of profits for the leading financial institutions. The Financial Select Sector SPDR Fund (XLF) holds a portfolio of the top U.S. companies involved in financial services, insurance, banking, capital markets, mortgage real estate investment trusts, consumer finance, thrifts, and mortgage finance. The XLF fell to a long-term low in March 2020, but it recovered to a higher all-time high over the following year.

Free money for financial institutions

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1 No-Brainer ETF to Buy in This Low Interest Rate Environment

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