Big banks came under pressure Wednesday after agreeing to pay nearly $6 billion in fines for a rate rigging scandal.
Despite the negative headlines, however, investors shrugged off the news—with many of the bank stocks—including Barclays and UBS—closing higher. And some traders are interpreting that price action as a signal to buy.
"I think a lot of this news is already priced in," Larry McDonald of Societe Generale said on Wednesday's "Power Lunch." And according to McDonald, we could be entering a phase of extreme outperformance in the financial space, particularly in regional banks.
McDonald noted that the KBW Regional Banking ETF, the KRE, is outperforming the broader Financial ETF, the XLF by 4 percent year-to-date. A trend which he sees continuing as the Federal Reserve gets set to raise interest rates later this year.
"A rising yield environment tends to benefit financials, primarily banks," said McDonald. "As the yield curve steepens, we should see positive tailwinds for the [space]."