Three sectors have seen the same amount of gains this year, but one will come out on top, according to one technician.
Financials, health care and consumer discretionary sectors have rallied about 21 percent this year.
Piper Jaffray’s Craig Johnson says that from a technical standpoint, financials are looking the best.
“If I have to pick one going into next year, I would pick the [financials ETF XLF],” he said Thursday on CNBC’s “Trading Nation.” “We just broke out of a 12-month consolidation range, and it looks like we’re going to have more room for that particular index to run.”
Strategist Mark Tepper also believes that banks are the best bet of the three. The CEO of Strategic Wealth Partners said that given tax reform and a possible continued rise in interest rates, banks are in the best position to benefit from both.
“Financials typically have very high effective tax rates that are obviously going to be lower with the tax bill,” he said on “Trading Nation.” “You throw in an increase in infrastructure spending and that should boost consumer and industrial loans, which have been lagging over the last several years.”
“And then obviously if the yield curve begins to steepen, that’s going to be a tailwind for the net interest margin as well, so we like the financials,” Tepper added.
Financials actually began the year as one of the most beaten-down sectors of the market, trailing other big sectors like tech. But there has steadily been a rotation out of growth stocks like big tech and into financials and industrials, in particular, Tepper noted.
