Experts: Banks look strong ahead of Fed liftoff

Large-caps or small-caps?

Small-cap stocks, particularly regional banks, look appealing as a Federal Reserve rate hike looms in the coming months, a wealth manager said Monday.

Markets have watched for indications of when the U.S. central bank will abandon its near-zero interest rate policy, an action that holds ramifications for U.S. stocks and many rate-dependent industries. Smaller financial names stand to benefit, said Robert Luna, CEO at Surevest Wealth Management.

"For most investors, that's a better way to play there," Luna said in a CNBC "Power Lunch" interview.

Traders work on the floor of the New York Stock Exchange.
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He pointed to the SPDR S&P Bank ETF, ticker KBE, with top holdings including MGIC Investment, Radian Group and Bank of the Ozarks. Luna contended that KBE holds better upside than the Financials Select Sector SPDR Fund, ticker XLF, which is more heavily weighted to financial giants like Wells Fargo, JPMorgan Chase and Bank of America.

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Large-cap banks can cash in on a rate hike, as well, said James Liu, global market strategist at JPMorgan Funds. Liu said he likes financials "across the board."

"Major banks can, in fact, do well," Liu told "Power Lunch" on Monday.

Liu added that he believes "cyclical" stocks will perform well in the coming months as the U.S. economy attempts to push through a sluggish period.

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