The financial services sector, the second-largest sector weight in the S&P 500, is delivering decent — though not market-beating — performances this year. But the group and ETFs like the Invesco S&P 500 Equal Weight Financials ETF (RSPF) can act as important portfolio diversification tools at a time when many portfolios are heavily tilted toward mega-cap growth stocks. The $308.54 million RSPF, which turned 19 years old earlier this month, is home to what some analysts call the best bank stocks. That group includes Minnesota-based U.S. Bancorp (USB).
“U.S. Bancorp is the largest nonglobal systemically important bank in the [US. It] has been one of the most profitable regional banks we cover. Few domestic peers can match its operating efficiency and returns over the past 15 years,” noted Morningstar analyst Maoyuan Chen.
The research firm’s list of the best bank stocks also includes M&T Bank (MTB) and PNC Financial Services Group (PNC). Both equities holdings of RSPF.
RSPF Has Prediction Markets Inroads
To be sure, it’s not a point for investors to get carried away with. But it is noteworthy in the current environment. RSPF has exposure to the booming prediction markets space. That’s likely an underappreciated factor. And that’s because of the ETF’s status as a home to a slew of old-guard bank stocks.
But not to be overlooked is the fact that Robinhood Markets (HOOD) is RSPF’s largest holding. That company is a major driver of event contracts volume to Kalshi. There’s also chatter Robinhood could pursue prediction markets acquisitions. There’s also talk that it could build its own yes/no derivatives exchange.
Likewise, Interactive Brokers (IBKR), RSPF’s second-largest component, is a prediction markets player. It smartly focuses on event contracts tied to economic data releases and financial instruments, not sports. By eschewing sports event contracts, companies reduce the risk of inviting scrutiny from regulators in states where sports betting is legal.
RSPF’s prediction markets inroads don’t end there. Member firm CME Group (CME) is partnering with FanDuel on event contracts, while Intercontinental Exchange (ICE) — the owner of the New York Stock Exchange and another RSPF holding — recently invested $2 billion Polymarket. That deal is particularly noteworthy. That’s because it values Polymarket at $9 billion to $10 billion post-money. There’s already talk that that company could be pursuing more financing at a $12 billion to $15 billion valuation range.
Coinbase Global (COIN), the largest cryptocurrency exchange operator and another RSPF holding, is also said to be mulling a move into prediction markets.
Originally published on ETF Trends
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