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ETF of the Week: IAI

VettaFi’s vice chairman Tom Lydon discussed the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI B-) on this week’s “ETF of the Week” podcast with Chuck Jaffe of Money Life.

While broker-dealers and security exchanges might not be the hot business of the moment, they present a unique opportunity coming off the banking turmoil.

The pullback from banks and regional banks last month affected all financial services ETFs, including the broker-dealers and the securities exchanges. However, broker-dealers are currently seeing a nice uptick in business and the exchanges are seeing more volume than they did six months ago, according to Lydon.

Broker-dealers and securities exchanges ETFs include investment banking and trading, such as Charles Schwab, which recently reported better than expected earnings, Lydon said, as well as industry giants such as Goldman Sachs.

IAI is an opportunity to get exposure to a sector of the financial services market that was painted with the same brush as regional banks and banks, but probably shouldn’t have been, and from an earnings standpoint, seems to be in pretty good shape, Lydon said.

“When you look at the moving average on this ETF, yes, it spiked down below the average,” Lydon added. “But it’s built itself back up to the point where it’s about 2% below its average now, and it’s looking like it might go above.”

Lydon said big asset managers and broker-dealers — like the Morgan Stanley’s of the world, the Raymond James, the LPLs, the Jefferies – have all seen more deposits, more trading, and more optimism, not only about the stock market but also about the bond market and all their clients who may be had a decent amount of money on the sidelines.

“You can see in the last three to five months, markets have come back, earnings are better than expected, and those are all aspects of the market that I think we can all participate in when we feel a new trend has developed,” Lydon said. “Here’s IAI, 2% away from its uptrend, if you’re looking for an opportunity, dive in with a small amount of money when that trend develops.”

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