Bank ETFs To Ride High On The Holiday Shopping Spree

Hearty consumer spending has been adding stimulus to the banking sector. This phenomenon was reflected in third-quarter earnings as well. In fact, analysts were of the opinion that credit cards had helped boosting the earnings results. Moreover, RBC Capital’s Markets analyst Gerard Cassidy believes that a resilient US consumer spending coupled with a solid economy will continue to back the banking sector. He expects these tailwinds to sustain in 2020 as well. Notably, the banking sector has outperformed the broader market in 2019 to date. The KBW Bank Index has surged 33% compared with the 29% gain of the S&P 500 Index in the year-to-date period (Why Bank ETFs Are Rising).

Gaining traction from the upbeat holiday season in 2019, large banks like JPMorgan Chase & Co. JPM, Bank of America Corp. BAC and Citigroup Inc. C also rose to their new highs on Dec 26. In fact, Bank of America scaled to its highest level since October 2008 after inching up around 1% on Dec 26. Citi also touched its maximum mark since January 2018 after rising 1.5%. The gains were largely owing to the e-commerce giant Amazon’s AMZN announcement of witnessing a record-breaking holiday shopping season (read: Nasdaq Hits 9,000 for the First Time: ETFs to Benefit).

The Holiday Sales

Per a Mastercard Spending Pulse survey, holiday sales increased 3.4% year over year. Moreover, there was an 18.8% year-over-year rise in the online sales, highlighting the change in consumer’s shopping pattern. The survey tracked sales from Nov 1 through Dec 24. It covered transactions that were completed using Mastercard’s network of payments systems, which also included estimated cash purchases and other modes of payments. However, the survey excluded the automobile sales.

Bank ETFs: Will the Rally Remain?

The banking space of the broader financial segment has been on a roll, buoyed by better-than-expected earnings, bargain hunting and the steepening of the yield curve. Also, the upbeat jobs and encouraging manufacturing updates are hinting at a wealthier economy. Per the Federal Reserve’s recently-released data, the manufacturing sector, accounting for 11% of the U.S. economy, witnessed a 1.1% rise in output during November against a 0.7% dip in OctoberIndustrial output also inched up 1.1% in November versus the 0.9% slip in October.

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