Two sectors have broken out to records this week, and analysts see opportunity

Two sectors have broken out to records this week, and analysts see opportunity

February 25, 2021

The S&P 500 is on track for a losing week, but there have been two bright spots in the market.

The industrials and financials sectors broke out to fresh all-time highs Wednesday and Thursday, respectively. Bets on the global economic recovery have given lift to the industrials, while financials are seen as a beneficiary of rising rates.

Delano Saporu, founder of New Street Advisors, pinpoints JPMorgan and Goldman Sachs as two financials stocks that could benefit from both higher yields, which boost banking profitability, and increased trading revenue.

"Those are firms that you probably want to have a second glance at. Although I'm not long them right now, I do think that is something to watch," Saporu told CNBC's "Trading Nation" on Wednesday.

Goldman Sachs is also exploring additional avenues of growth, a strategy Saporu applauds.

"Their online high-yield savings platform, they're lending on there. They also just got into robo-advising with their platform so they're looking for other ways for growth. I think that's super important for people that are looking for possible growth from these firms because they're … past the [pre]-pandemic levels," said Saporu.

JPMorgan and Goldman Sachs both hit all-time highs Thursday. They have risen 20% or more so far this year.

Steve Chiavarone, portfolio manager at Federated Hermes, is bullish on both financials and industrials as a play on the cyclical value trade.

"In August of 2020, growth was completing its biggest ever run versus value, over 44% on a trailing 12-month basis. We've only made back about 15% of that [since then]. We think there's a lot more room to grow," Chiavarone said during the same interview.

Financials, for example, trade at a discount to the rest of the market. The XLF financials ETF has a 15 times forward multiple compared with the S&P 500's 22 times.

"We really like both these, and the value cyclical economy is a high conviction call for us for the remainder of 2021," said Chiavarone.

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