Financial stocks are the best-performing group in 2024 and, even though they’re widely thought to have more room to run as a sector, a subset of them are even more favorably positioned. The S & P 500 financial sector has surged 36% so far this year, outpacing both the communication services and information technology sectors that contain all the high-flying megacap technology stocks. In particular, investors expect financial companies will benefit after President-elect Donald Trump’s election victory and promises to deregulate business. This month alone, the group rallied 10%, twice the return in the S & P 500. “They’ve got good momentum, good earnings growth prospects under a Trump administration, probably less onerous regulations, decreased likelihood of banks being forced to adopt Basel III,” said Sam Stovall, chief investment strategist at CFRA Research, referring to global capital requirements. “We have an overweight on financials, and are looking forward to keeping that for quite some time.” XLF YTD mountain Financial Select Sector SPDR Fund (XLF) in 2024. The technical setup for all financial stocks — which have broken out to new highs and are in a bull market — is also encouraging, but that backdrop might especially benefit fast-growing financial technology companies, according to Rob Ginsberg, technical analyst at Wolfe Research. Ginsberg said fintech stocks will outpace the entire financial sector, as represented by the Financial Select Sector SPDR Fund (XLF) , as well as bank stocks in the SPDR S & P Bank ETF (KBE) , each of which could themselves rally 10% to 15% over the next 12 months. “If this bull market persists, the upside in those fintech names could be 3-4x what we see in the overall XLF,” Ginsberg said. Block is one example of a fintech name that could break out, said the technical analyst. The stock was last trading around $90, but could rise more than 75% to $160 per share “easily” by the end of 2025, he said. The stock is a consensus buy on the Street, according to the CNBC analyst consensus tool. PayPal could jump nearly 40% to $125, from around $87, where it was recently trading. Toast is another name Ginsberg is bullish on. Financial stocks may be punished first in the event of a correction in the broader market, Ginsberg said. But even with sentiment at elevated levels, he expects the base case for a bull market remain intact.
