This ETF Could Benefit From Additional U.S. Stimulus

 | Feb 08, 2021 06:43

Financial services and bank stocks are in the spotlight as the likelihood of an additional US fiscal stimulus package increases. In 2020, financial shares underperformed, but renewed hopes for better returns in 2021 mean more capital is likely to go into this sector.

Therefore, today’s post looks at an exchange traded fund (ETF) that focuses on financials.

Highly Cyclical Sector /h2

The term "financial services" is mostly associated with banks. As banking is a significant part of the financial industry, bank shares get the most attention, especially during earnings seasons. But insurance firms, financial technology (fintech) companies, real estate investment trusts (REITs), asset managers, brokerages, stock exchanges and financial data providers are also part of this sector.

The segment is cyclical. Changes in economic outlook, such as economic growth, interest rates, housing market activity, global health, political and trade developments, affect financial firms.

There are encouraging signs that the US economy might soon recover from the uncertainty of the pandemic. Boston Federal Reserve Bank President Eric Rosengren believes the second-half of 2021 will see robust recovery. So do other Fed regional bank presidents.

Yet, job losses are still part of the economic reality. On Feb. 5, the US Labor Department announced a new share repurchase program of $30 billion. So far in 2021, JPM stock has returned around 9%.

With that, here is our fund for today.

Vanguard Financials Index Fund ETF Shares/h2
  • Current Price: $76.67
  • 52-Week Range: $42.34 - $78.17
  • Dividend Yield: 2.1%
  • Expense Ratio: 0.10% per year

The Vanguard Financials Index Fund ETF Shares (NYSE:VFH), which has 412 holdings, tracks the returns of the Spliced US IMI Financials 25/50 index. The fund started trading in January 2004 and assets under management stand around $7.3 billion.