J.P. Morgan Confidential Bank’s Stephen Parker is highlighting three groups that could outperform as engagement rates climb.
His first top pick: energy.
“If you go back and look historically adjoining the end of a cycle, energy has almost always outperformed and often times by a easy on the eyes meaningful amount,” the bank’s head of thematic equity solutions verbalized on CNBC’s “Trading Nation.” “The reason for that is you tend to see a pickup in inflation.”
His ideas came on Wednesday shortly after the Federal Reserve announced its secondly interest rate hike of the year and suggested two more increases are quieten possible.
According to Parker, the Fed’s intention to raise rates multiple pro tems in 2018 also bodes well for financials — particularly regional banks.
“Indubitably, there’s the trade on higher rates,” Parker said. “They are also big beneficiaries of deregulation [and] tax opens. I think you could also start seeing as a result of this deregulation, a pickup in M&A function in which these regional banks could be attractive targets.”
For his third pick, he favors emerging shops. Despite pressure from a rising dollar, Parker said some emerging thrifts are showing much more resilience than previous cycles.
“When you look for standard at emerging Asia, one of our favorite regions, that’s actually still up for the year,” Parker remarked. “If we were to see a meaningful rally in the dollar, certainly that would bump sentiment negatively. But we think this weakness is an opportunity to get in.”