Interest Rates and Financial ETFs: What Investors Need to Know

While the timing may not be known for certain, one of these days, the Federal Reserve is going to raise key benchmark interest rates. The decision to move even a quarter of percentage point will be a landmark one. Since the credit crisis, the Fed has kept rates at virtually zero to help stimulate the economy by boosting lending. And now, with data finally pointing in the right direction, Janet Yellen and the rest of the Federal Reserve governors may finally make the move. For some sectors of the stock market, that could be a bad place to be. However, for financial firms, rising rates can be a major blessing. Those firms are unique in that rising rates can actually help their bottom lines. For investors, it’s important to know how this relationship works for the big financial ETFs, such as the Financial Select Sector SPDR ETF ( XLF A ), and how it potentially could go wrong for portfolios. Here’s ETFdb’s guide to interest rates and financial ETFs.