Two groups of stocks have the best possibility to outperform the market, according to Nicholas Colas, chief market strategist at Convergex.
Little has changed for the S&P 500 index for the year, however, there is a more positive side to the stock-market benchmark’s changes.The two sectors that are recommended are: financials and technology.
Financials: There are two things going for banks. One is that Janet Yellen’s Federal Reserve seems to be normalizing interest rates. Higher rates are beneficial for banks because it allows them to charge a higher interest to borrowers.
Secondly, solid gains are predicted for financials over the past month ahead of the rate-hike as more gains come for the sector after a rate hike is confirmed as early as December. Colas says in a Wednesday research note, “there should be more room to run if the Fed does move.”
Financials is still down nearly 2% year to date.Technology: its exceptional performance over the past month gives it momentum to go even higher. However, Colas acknowledges that an increase for technology also means that it might have slowed down its gains for the year. The technology sector is up 5.3%.