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Put your money in the banks: Trader

VIDEO2:1802:18
Financials in the spotlight

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.