Put your money in the banks: Trader

The financial stocks surged alongside the market as a whole on Thursday, with a 2.6 percent rise that saw every single stock in the sector finish in the green. And according to S&P Capital IQ equity chief investment officer Erin Gibbs, one subset of the financials—the bank stocks—is among the most attractive areas for investment now.

"They're looking a little oversold, and have very good growth [potential] into the next year," Gibbs said Thursday on CNBC's "Power Lunch."

Analysts are expecting the banks to report earnings growth of 15 percent in 2016, versus just 8 percent for the financials, according to S&P. Meanwhile, the average analyst target price for bank stocks implies 18 percent of upside.

Bank stocks are "really one of the sweet spots," Gibbs said.

But Societe Generale head of U.S. strategy Larry McDonald warns that financial risks emanating from Asia need to subside "before you can get comfortably long the U.S. financials."

Additionally, the chart gives him cause for pause. McDonald notes that the bank sector ETF (XLF) has fallen dramatically below its long uptrend line.

"We've broken down technically," McDonald declared.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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