World’s Biggest ETF Adds $7.3 Billion in Day After Bank Rescues
SPY saw its biggest inflow since the vaccine news hit in 2020 and its sixth biggest over the last decade. Moves to shore up banking system help settle nervous market. Major financial sector funds XLF, KRE also post big inflows.
- The recent downward volatility of bank shares is largely an overreaction to isolated events. Bank insiders seem to agree as they are buying a lot of shares.
- The outlook for banks is generally good given rising rates. Dividends are safe in the foreseeable future, which gives a good base for valuation.
- The government will probably backstop a collapse in the financial sector, so there is a put of sorts here.
- The market is clearly spooked as implied volatility for diversified bank ETFs like the KRE and XLF are at year-long highs and have seriously backwardated term structures.
- Selling cash-secured or naked puts on ETFs is my preferred way to play this, but buying shares is highly advisable too.
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Nice