Don't chase the rally, but buy the dips: Katz

Katz: Buy in the next pullback
Katz: Buy in the next pullback

As energy prices rise, fear will dissipate from the financial sector, according to one executive.

"The Fed ultimately will raise rates," David Katz, Matrix Asset Advisors president and chief investment officer, told CNBC on Friday. "The market is up about 12 percent in the last six weeks," he said, adding that the factors that have driven the market surge will reach banks.

Katz's comments came as the Federal Reserve lowered its hike projections for the year, on Wednesday. The financial sector, however, has been the worst-performing sector of the S&P 500 for most of 2016, down about 5 percent year to date. The sector traded up slightly on Friday.

"The fear a month ago was their energy portfolios would be bad, but with energy prices rebounding that fear gets taken off the table," he told "Closing Bell."

Katz's firm foresees the financial sector thriving as a whole, but prefers JP Morgan, Wells Fargo, Morgan Stanley and Goldman Sachs. The investor and his firm own JP Morgan and Morgan Stanley.

While U.S. oil topped $41 a barrel on Friday morning, the commodity closed the session down nearly 2 percent. Stocks managed to close up on the day, with both the S&P 500 and the Dow Jones industrial average positive for the year. JP Morgan and Goldman Sachs were top contributors to stocks' closing higher on Friday.

The chief investment officer has been aggressively encouraging investors to buy the dip and considers that the rally is just getting started, but does not recommend "chasing" it. "We think the year ultimately is going to be a 9 to 11 percent year with a great deal of volatility," Katz said. "We just had a 12 percent jump, so we think it's going to slow down," he said, adding that when things look "very bad," investors should put "money to work."

In terms of other attractive sectors, Katz forecasts that the industrials sector will do better, his firm is currently "selective" on health-care stocks, but warns against utilities.

"We'd be taking money out of utilities," he said. "If you look at them on a valuation basis, they're selling at about 17 or 18 times earnings, and even though the yields are OK, that's the extreme in terms of their p/e over the last 10 or 20 years."

— CNBC's Evelyn Cheng contributed to this report.