Earnings season is upon us once again. That means it's the perfect opportunity to make some fast cash.
Technology has dominated the markets as the best-performing sector so far this year. But it's not the sector I'm looking at for the fall.
And while the talking heads are betting on technology...
There's a much bigger play in the works.
Why You Should Focus on the Financial Sector
Every earnings season brings up the same set of concerns or confirms the same old concerns for publicly traded companies and the investors that own shares of those stocks.
The U.S. financial sector is going to have another strong earnings season this coming quarter. The Financial Select Sector SPDR ETF (NYSE Arca: XLF) chart below shows how well the financial sector has performed this year.
It is at - or just slightly off - its yearly high.
Now, this doesn't mean it is the best-performing sector thus far this year. Over the past quarter, technology has dominated the market, but the financial sector will be one of the biggest leaders this fall.
Now one could speculate that it's due to better than expected earnings. But it's actually due to the fact that we have seen higher interest rates. Couple that with more rate hikes anticipated to come (the next one most likely to happen in December) and it will adjust future earnings for banks and broker dealers.
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People tend to think that equities drop in value when interest rates rise.
But that isn't the case.
Assuming you're a company whose earnings come from interest and interest received on short sales (something you have sold and have cash for), then when interest rates rise, you stand to make more money on cash on deposit. It's not something a lot of people think about when investing in the stock market.
The best stock to watch in the financial sector right now is Morgan Stanley (NYSE: MS).
Here are the three reasons why...
About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.