9 Stocks To Watch: Financial Sector Outshines Tech In 2024 As 'Trump Trade' Sparks M&A Optimism

Financial stocks have surged ahead of tech in year-to-date performance, fueled by a Trump-led rally on Wednesday that lifted banks and brokers amid investor expectations of a deregulation-friendly political landscape ahead.

The Financial Select Sector SPDR Fund (NYSE:XLF) has risen by 30% in 2024, outpacing the Technology Select Sector SPDR Fund (NYSE:XLK), which is up 26% this year.

Small and mid-sized banks, tracked by the SPDR S&P Regional Banking ETF (NYSE:KRE), have also seen strong performance, with a 13% jump following election results, bringing them in line with tech sector gains.

Financial stocks, which have lagged behind technology for six of the past seven years, are now catching up, propelled by renewed optimism for deregulation and M&A activities.

Analysts Expect M&A Activity to Heat Up

With the Trump administration’s return to the White House, analysts are projecting a significant uptick in mergers and acquisitions (M&A) in the financial sector.

“Under the upcoming Trump II administration, we expect a more favorable backdrop for M&A which could lead to additional activity in the space after having been quiet for the past few years,” said Anthony Elian, CFA, analyst at JPMorgan.

Lower regulatory barriers ...