The Fed Is Done... So Bet On This Sector ASAP

Don’t miss the bigger picture… [TradeSmith Daily]( The Fed Is Done… So Bet On This Sector ASAP By Lucas Downey, Contributing Editor, TradeSmith Daily Perhaps the biggest market shift in several years is here. Pundits are out there squabbling whether the latest stock rally has legs. Respectfully,they’re missing the bigger picture. The Fed is done raising rates. Those six powerful words mean relief for stocks is near. And the shift has already begun. There’s one sector of the market that stands to benefit most from the conditions we’re seeing today. I think you should bet on it today, and I’ll tell you exactly what it is. But let’s first review last week’s unforgettable rotation, which led to what I’m seeing right now. RECOMMENDED LINK [Could This Tiny Microcap Be the Biggest A.I. Opportunity of the Decade?]( This may be the biggest tech opportunity you’ll see in your lifetime. (HINT: It’s not Google, Microsoft, Nvidia, or other obvious companies that have already run up). [Go HERE for details]( Yields Crash and Stocks Soar The stock market’s Achilles’ heel has been soaring interest rates. Since the Fed began its hiking spree in 2022, most stocks have sputtered. However, when rates retreat like they are now, stocks explode higher. Last week in particular was monumental. Not only did the 10-year fall 7% peak-to-trough, but it broke below one of the most followed technical indicators, the 50-day moving avearge. The 10-year yield peaked at 4.99% on Oct. 19 and fell to 4.52% on Nov. 3. That’s nearly a 50-basis-point repricing. FactSet Given that rising interest rates act like gravity on stocks, it only makes sense that equities rebound when yields crash. And boy have they. The S&P 500 climbed a mind-numbing 5.85% last week. That’s the best weekly return all year. But that performance pales in comparison to other areas of the market: - The Financials Select Sector Fund ETF (XLF) bounced 7.41%. This ETF holds a basket of banks, insurers, capital markets firms, and financial services players. - The small-cap barometer Russell 2000 Index (IWM) surged 7.59% - Shunned regional banks (KRE) catapulted 12.22%, more than doubling the S&P When rates dump, just about all stocks bump. But right now, financials and small-caps are leading the pack. FactSet, TradeSmith You may be wondering why finanicals and regional banks in particular bounced so heavily. If you recall, a couple of months ago, I laid out a data-driven case that [financials pop the most when the final Fed hike is in](. Folks, professional investors are wagering on a string of rate cuts next year. This is a major pivot from just weeks ealier. As shown in the chart below, data from the CME FedWatch tool shows investors expect the first rate cut to come in May. That’s followed by the forecasts of another cut in July, one in September, and one more in December: Falling interest rates is good news for the Financial sector. As I [wrote back in September]( this can mean: - More deal flow — Banks can benefit from more deal flow as rates are expected to fall. According to Axios, 2022 was the worst year for the IPO market since 1990. - Yield curve steepening — As longer-duration rates climb relative to the shorter end, borrowing short to lend long begins to make more economic sense. - Private equity (PE) resurgence — Lower rates on the horizon should increase the lending appetite of PE firms. - Mortgage underwriting — As rates go higher, new mortgages become less attractive. Lower mortgage rates will spur home-buying demand. And it’s not only these logical benefits that should solely influence the decision to bet on financials. History proves that the Financial sector is the best performer once the final rate hike is in. RECOMMENDED LINK [This new A.I. tech is a retirement game changer]( A brand-new A.I. algorithm recently came onto the scene that can predict stock prices one month into the future with astonishing accuracy. Imagine if you had this kind of predictive power. It could be a complete retirement game changer. [Click here to get the full story and to see what this algorithm is saying the price of AAPL, NVDA, TSLA will be one month from now](. Since 1994, once the Fed is done, this group soars an average of 30% 12 months later: When you put the evidence together, making a bet on financial stocks right now is smart. Yields are falling and the pros are betting the Fed is done. The major shift has already started, with banks leading the cavalry charge. But how can you make the most of this move? The obvious way to play this trend is to buy financial stocks. And the easiest way to do that is to buy a basket of them with the Financial Select Sector ETF (XLF). But you shouldn’t expect incredible gains owning an ETF. For that, you’ll want to own the best financial stocks in the market. And for an excellent tool to help you find them, you should check out [Ratings by TradeSmith](. Our Ratings software considers nine different metrics to give you the picture of a stock’s health in a fraction of a second. All you have to do is scan through the XLF holdings (easy to find within TradeSmith Finance), [check the rating]( of any individual tickers, and you'll quickly uncover the best stocks to own within. And for those looking to trade the small-cap end of the financial universe, especially the wickedly oversold regional banks, Ratings is essential to making sure you only buy the highest-quality names. [Go right here to learn more about Ratings by TradeSmith, and get this essential tool in your kit.]( Regards, Lucas Downey, Contributing Editor, TradeSmith Daily Get Instant Access Click to read these free reports and automatically sign up for research throughout the week. [25 Doomed Blue Chip Stocks]( [3 Stocks That Could Triple This Year]( [Download now on the Apple Store]( [Get It On Google Play]( [Customer Support: 866.385.2076](tel:+866-385-2076) | support@tradesmith.com [Request Customer Service](mailto:support@tradesmith.com) ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers’ exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith’s content do not constitute personalized investment advice. 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