Additionally, the Financial Select Sector SPDR (NYSEArca: XLF), Fidelity MSCI Financials Index ETF (NYSEArca: FNCL), iShares U.S. Financials ETF (NYSEArca: IYF) and Vanguard Financials ETF (NYSEArca: VFH) provide broad exposure to many well-known financial company names.
Subramanian argued that health care is “cheap” compared to historical levels and is trading at a discount to the S&P 500. Health care fundamentals are strong, with over half of the companies beating earnings and sales estimates during the third quarter.
Technology also appears “cheaper” and less crowded after the big sector reorganization moved high-flyers like Netflix and Facebook out of the sector. “Positioning risk is neutral to positive,” Subramanian said.
Lastly, financials companies could strengthen as the sector increases its buyback programs. “Whereas other sectors have been buying back shares for almost a decade, Financials were disallowed until recently. But Financials’ share buybacks have ticked up substantially, and the sector has the second highest dividend growth in the S&P 500,” the strategist added.
For more information on the market sectors, visit our sector ETFs category.