Finally, both U.S. technology and U.S. financials are cyclical sectors. When the economy is strong, as it tends to be in a rising rate environment, cyclical stocks typically outperform. In contrast, defensive sectors (think utilities) tend to outperform the broader U.S. market when economic growth slows, and as rates rise, they can be vulnerable, given that they may have significant debt loads.
Exchange traded funds (ETFs), such as the iShares U.S. Technology ETF (IYW) and the iShares U.S. Financial Services ETF (IYG), can provide access to the U.S. Tech and U.S. Financials ex-REITs sectors.
Heidi Richardson is a Global Investment Strategist at BlackRock. She is also Head of Investment Strategy for U.S. iShares.