Jefferies gave investors its top sector picks for its small-cap strategy based on exposure to domestic demand and valuation.
"Since election, it has been risk on with cyclical sectors leading the way and defensive areas lagging. Our sector allocation is more domestically focused, and given the dollar's strength, we think it makes sense," equity strategist Steven DeSanctis wrote in a note to clients on Dec. 22. "We are overweight discretionary and industrials. We are overweight tech, which has been a source of funds and lagging behind since the election."
The strategist said consumer discretionary stocks have a 35 percent corporate tax rate on average the last five years and thus will disproportionately benefit from any tax reform under a Donald Trump administration.