Research > ETFs > ETF / ETP Commentary > 

Leverage Financial Sector Strength As Rates Rise

The Federal Reserve has already signaled that it plans to raise rates in 2022, which means opportunities to lever up trades within the financial sector using the Direxion Daily Financial Bull 3X ETF (FAS A-).An improving economy means that the Fed is no longer inclined to keep its stimulus measures in place, such as easy money. Rising rates might not be a good thing for consumers, but to the financial sector (banks in particular) that rely on loan products, this could be good for their bottom line.An improving economy is also causing yields to rise, which doused the equities market with volatility. The financial sector, however, has been able to mute the effects of much of this.“Increased optimism about the strength of the economy pushed Treasury yields higher following last week’s FOMC meeting. Mortgage rates in response rose across all loan types, with the benchmark 30-year fixed rate reaching its highest level since early July 2021,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.FAS seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Russell 1000® Financial Services Index. The fund invests at least 80% of its net assets in financial instruments and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.The index is a subset of the Russell 1000® Index that measures the performance of the securities classified in the financial services sector of the large-capitalization U.S. equity market. According to Morningstar numbers, the fund is up 90% for the year.Hot Housing SectorRising interest rates, however, mean that mortgage demand could be tamped down, but that should be balanced by a hot housing sector. Prices continue to appreciate, and higher asking prices could translate to bigger loans for purchases to offset falling demand in re-financing activity.“With home-price appreciation continuing to run hot, increasing more than 19 percent annually in July, applications for larger loan amounts continue to outpace lower-balance loans. The average loan size for a purchase application reached $410,000, its highest level since May 2021,” Kan said.Nonetheless, for bears who might sense weakness, there’s the Direxion Daily Financial Bear 3X ETF (FAZ B). Taking the opposite side of FAS, FAZ seeks daily investment results that equate to 300% of the inverse (or opposite) of the daily performance of the Russell 1000® Financial Services Index.For more news, information, and strategy, visit the Leveraged & Inverse Channel.

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.