SPDR KBW Capital MarketsKCE

Morningstar Rating

ETF Research and Analysis

by John Gabriel
Suitability

Investors seeking exposure to brokers, exchanges, and other capital markets facilitators might find SPDR KBW Capital Markets KCE to be an interesting satellite holding. The "capital markets" rubric covers a wide variety of firms.  Read more 

Bull Case

This ETF provides an opportunity for investors to participate in an eventual recovery for the capital markets industry without taking on firm-specific risks.

Thanks to aggressive cost-cutting across the board amid the credit crises, many of the firms included here are well positioned for impressive profit growth, if their AUMs and revenue streams recover.

Top holding Goldman Sachs has repurchased its TARP warrants for $1.1 billion, thereby ending its involvement with the TARP. This released the firm from the restrictions on executive pay, which could aid in recruiting and talent acquisition.

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Bear Case

This ETF has been volatile; its standard deviation over the past one- and three-year periods clocked in at 46% and 31%, respectively. This compares with one- and three-year standard deviations on the S&P 500 of 30% and 19%, respectively.

Companies in the financials sector are subject to extensive governmental regulation, which may adversely affect the scope of their activities, the prices they can charge, and the amount of capital they must maintain.
Recently, the deterioration of the credit markets has caused an adverse impact in a broad range of mortgage, asset-backed, auction rate, and other markets, thereby negatively affecting a wide range of financial institutions and creating instability in the financial markets. Read more 

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