Insurance Gains the Trump Factor

11/22/2016 7:00 am EST

Focus: ETFs

Moby Waller

Editor, Wyatt Research

What hidden sector is poised to benefit from a Trump presidency? asks Moby Waller. Here, the contributing editor to Daily Profit looks to his current #1 sector ETF pick, a bet on the insurance industry.

My favorite under-the-radar ETF sector for 2017 is SPDR S&P Insurance ETF (KIE), which is the best way to play the insurance group. 

It is narrowly focused on the insurance sector, as opposed to financials ETFs that focus on a bigger group of stocks. Additionally, KIE is the largest and most liquid insurance ETF.

KIE holds a diversified basket of 45 different stocks, with no single holding over 2.7% of the total portfolio.

Regardless of the Fed's snail's pace in raising rates, longer-term interest rates have been rising globally for months now in the markets.

And in the wake of Trump's election, they've spiked higher. The insurance sector generally benefits from higher interest rates.

There is a correlation between higher rates and performance in financial stocks. And for insurance companies particularly, higher interest rates tend to directly boost their bottom line. 

Additionally, Trump proposals including the dismantling of Dodd-Frank and Obamacare could be beneficial to the insurance industry.

The ETF has quietly gained nearly 12% this year. I anticipate further market-beating gains ahead in 2017 for KIE. Technically, the stock shows steady bullish momentum and strength in the trend.

And based on the potential Trump and interest-rate factors, I see potential further accelerated upside for the ETF up to a 20% to 25% gain in 2017.

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By Moby Waller, Contributing Editor to Daily Profit

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