Insider Monkey
12 Best Financial and Fintech ETFs To Buy
Hamna Asim
17 min read

In This Article:

In this article, we discuss 12 best financial and fintech ETFs to buy. If you want to skip our discussion on the finance industry, head over to 5 Best Financial and Fintech ETFs To Buy. 

In the past year, the collapse of Silicon Valley Bank caused major repercussions in the banking sector, particularly affecting regional banks. Even major US financial institutions faced challenges throughout 2023. In 2024, a global economic slowdown and macroeconomic weakness fuelled by high interest rates are expected to stir up problems for the banking industry. Although governments worldwide are implementing measures to control inflation, many factors still pose a risk to economic prosperity, including supply chain disruptions, changing trade relationships, geopolitical tensions, and extreme weather events. IMF's latest forecasts indicate global economic growth of only 3% in 2024, with developed economies showing modest growth rates and emerging economies experiencing notable growth. 

According to a Deloitte report, banks globally will face challenges that impact their revenue generation and cost management in 2024. High interest rates have increased net interest income, especially in the United States and Canada, while also driving up funding costs and reducing margins consequently. The global banking industry is now faced with an uphill battle to control deposit costs while customer expectations and market competition skyrocket. Loan growth is forecasted to be modest, given the high borrowing costs and overall macroeconomic dynamics, with banks likely to maintain restrictive credit lending policies. While consumer spending is strong, demand for credit card and auto loans is predicted to remain robust, while demand for corporate loans may temporarily weaken before likely recovering later this year. Additionally, climate change considerations are largely impacting credit availability and loan demand. The blend of higher deposit costs, lower policy rates, and limited loan potential may affect banks' ability to maintain strong net interest margins in 2024. Looking ahead, the global banking landscape is expected to experience further transformation, with Chinese and American banks dominating global rankings and rising influence from Indian banks and Middle Eastern sovereign wealth funds anticipated over the coming decade.

In 2024, Fidelity believes there may be a reason for cautious optimism despite the unsettling closures in 2023, which were driven by specific circumstances not necessarily applicable to all banks and financial institutions. Macroeconomic factors such as growth, inflation, and Federal Reserve policy will likely remain pivotal for the financial sector and the broader market. Recent events at Silicon Valley Bank underscored the importance of deposit quality in the current environment. With interest rates rising, depositors now have higher-yielding options for their excess cash, making deposits more susceptible to potential flight. Hence, focusing on high-quality deposits has become imperative. Institutions like Wells Fargo, Bank of America, and M&T Bank illustrate the advantages of such stability. 

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