For Jim Cramer, companies in the financial sector will replace the big technology companies in the next bullish rally.
So far this year, the banking and financial sector has been severely punished, despite the rise in interest rates. Proof of this is the XLF index focused on companies in this sector, which has accumulated a drop of more than 18%. Fortunately, the situation could be close to reversing.
Jim Cramer, the former hedge fund manager and current host of CNBC's financial show Mad Money, said financial stocks could slowly be replacing big tech as the new market leaders.
"I always thought the group had the potential to become a leader again, but the banks were never able to do that because the Fed kept rates so low that it was hard for them to make money. Now that's over," he said.
"The Federal Reserve is allowing these companies to make a ton of money by paying them next to nothing for their deposits and then reinvesting that money risk-free in short-term Treasuries," he explained.
For Cramer, it is likely that the Fed will not stop its campaign of rate increases in the short term, which will continue to benefit banks and other financial companies that are also listed on the stock market.
As the financial results for the third quarter of the year showed, some commercial and investment banks are facing the challenging context with relative success, which sooner rather than later will be reflected in their share prices.