First Trust NASDAQ ABA Community Bank Index Fund (QABA)

QABA offers exposure to small community banks with attractive valuations, higher yields, and potential acquisition upside versus larger peers. Despite some compelling individual bank stories, QABA's historical returns have been erratic, and the fund has lagged broader benchmarks recently. The ETF carries higher risks due to its sensitivity to interest rates and concentrated exposure to smaller banks, which may be depending heavily on commercial real estate.

First Trust NASDAQ® ABA Community Bank Index Fund ETF holds 154 small and micro-cap banks and thrifts. The QABA ETF is well-diversified in states and holdings, and shows growth characteristics within the banking industry. QABA has a lackluster track record, lagging the banking industry benchmark and the small-cap benchmark.

After reaching a record high, all three bourses lost momentum on sticky inflation and the Fed's hawkish comments.

July witnessed the "Great Rotation" in the U.S. stock market as investors shunned the hot technology stocks in favor of smaller companies and other sectors, which are the bigger beneficiaries of the Fed rate cuts.

Wall Street offered a mixed performance last week.

Wall Street was mixed last week with the S&P 500, the Dow Jones and the Nasdaq losing 1.9%, adding 0.7% and retreating 3.7% last week. The small-cap index Russell 2000 advanced 1.7% last week as “Trump Trade” gained momentum.

Wall Street delivered mixed performance last week. Here are some top-performing ETF areas.

Bank ETFs soared to a new one-year high as the probability of Donald Trump returning to the White House has risen significantly along with a Fed rate cut in September.

Wall Street is ending the fourth quarter on a sweet note. After a Downbeat October 2023, stocks surged in November and December on the hopes of Fed rate cuts in 2024.

Given the decent valuation of the banking sector and chances of higher net interest rate margins, investors can keep track of these ETFs for gains.

The journey this year for bank ETFs has been anything but smooth. However, the tables are probably turning for the segment as the rates are peaking and the yield curve is steepening.

Bank assets and liabilities are at an extreme duration mismatch, where balance sheets are filled with long-duration, low-yielding fixed-income securities and loans, while liabilities are shorter-term than previously anticipated. Significant issues persist within the banking sector concerning the quality of their balance sheets, which, in many cases, have deteriorated further due to rising interest rates and banks' decreased ability to generate profit.

On this episode of ETF Prime, host Nate Geraci speaks with a trio of industry experts to discuss key stories and trends. He begins with Dave Nadig from VettaFi, exploring significant and hype cycle topics that have shaped the industry in the last several years.

The First Trust NASDAQ ABA Community Bank Index Fund ETF offers a steady dividend yield and low-risk profile due to its investments in less volatile community banks. Despite the potential benefits from interest rate hikes and digital transformation, QABA has underperformed, with a 26% decline in price over the past five years. Cybersecurity and credit risks pose significant threats to community banks, which may hinder their growth, especially amid technological development.

By now, we all know that the U.S. economy went through a crisis triggered by its regional banking sector in the March-April period. The collapse of three U.S. regional banks since March raised fears of a volley of bank failures.

Lipper Financial Services ETFs recorded their largest weekly outflow of the year over the past fund flows week (-$1.4 billion). On top of the bank failures, market participants are worried about the largest U.S. banks gaining an increasing market share by allowing them to take over the smaller regional institutions.