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These hot trades will only get hotter: Traders

As U.S. stock markets rally on the back of Donald Trump's presidential win, several top sectors in particular have come into focus and could be headed higher.

Financials and health care are two of the best-performing S&P groupings over the last week, rallying 10 percent and 3 percent, respectively.

"Broader products like the [Health Care Select Sector SPDR Fund] XLV, and the subsector products here like the IBB and the XBI, which focus on biotech" are places to look for upside into year's end, according to Stacey Gilbert, head of derivatives strategy at Susquehanna.

Gilbert noted that she sees flows into biotech she would "label as more bullish, suggesting that there is more upside here, particularly since they have been underperformers year to date.

The SPDR S&P Biotech ETF (XBI) and the iShares Nasdaq Biotech ETF (IBB) are up nearly 18 percent and 12 percent in the last week, though both in the red since the beginning of the year.

And financials, Gilbert said Friday on CNBC's "Trading Nation," are "fan favorites this week," particularly on the regional levels. She pointed to the SPDR S&P Regional Banking ETF (KRE) as one winner since last week, up nearly 15 percent in that time. Investors have moved out of traditional "yield plays" like utilities as U.S. bonds have sold off.

Morgan Stanley on Monday upgraded Citigroup to overweight and remain overweight large-cap banks, citing a Republican sweep of the White House, the House of Representatives and the Senate "is positive for all financial stocks. More growth, higher rates, less regulation, lower taxes."

For David Seaburg of Cowen & Company, while biotech could rally into year's end, more opportunity lies in the banks.

"I love biotech, obviously there's a massive sentiment shift here," Seaburg said Friday on "Trading Nation."

"But I think you need to get the long-holding institution in here first to jump on board, and really get their feet back into this game and buy stocks, so that could take a little time."

Investors fled biotech this year as Democratic presidential nominee Hillary Clinton made several remarks about addressing increases in drug prices, driving down the IBB.

Seaburg said that alternatively, the KRE is one ETF to keep an eye on into year's end, and he sees upside for the regional banks.

Top holdings within the KRE include leading regional banks like KeyCorp, Regions Financial Corporation and Fifth Third Bank.

Seaburg mentioned Donald Trump's transition team's proposals about "dismantling" the Dodd-Frank Act may be a factor here in the banks' moves, though noted "radical" changes to the legislation likely won't come, "however the [Consumer Financial Protection Bureau] is probably going to have some sort of amendment, so that's going to be very favorable for regional banks."

The CFPB was created upon the passing of the Dodd-Frank Act in 2010, which tightened regulation on the financial services industry as a result of the financial crisis.


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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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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