As 2023 comes to a close, What is one key sector to watch in the year ahead?
Interest rates are gonna to play a big part of that story as we know that a lot of focus on whether the Fed will cut rates as early as March. S&P500 is outperforming in 2023 just around 24-25%. What could be one driving force in key sector to watch? It is gonna be financials.
From fundamental basis, interest rates are falling and mortgage rates will fall, and that will improve asset quality for the banks and also unlock demand for loans and reignite lending. So they should help regional banks and financials. Financials are under owned by hedge funds right now, they are like the energy stocks of 2021.
From technicals basis, the sector is second behind technology in the S&P500 weighting, and it has a base breakout in absolute and relative terms. It is contributing to resent improvement in breadth and has potential to continue doing so with the breakouts ahead.
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