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Power Play: Betting on financials as rates rise

Traders work on the floor of the New York Stock Exchange.
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Traders work on the floor of the New York Stock Exchange.

Financials are down more than 8 percent since the Fed raised interest rates in December. It has not been a good year so far for a sector that was widely expected to perform well in a higher rate environment.

But Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds, tells CNBC's "Power Lunch"on Wednesday, the outlook is better now. "They have [rallied] a bit. I'd expect more in 2016, but [it's] company and sub-industry specific," Cuggino said.

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The Fed took the first step, but Cuggino points out we still don't know exactly how many rate hikes we will have this year.

"I am expecting gradually rising market interest rates and a flattening yield curve," Cuggino said.

Financials are off more than one percent on a down day for the market.