Jefferies adjusts Financials, Materials and Staples Sectors

Published 31/01/2025, 14:02

Investing.com -- Jefferies made key adjustments to its sector strategy, upgrading Financials to Overweight while downgrading both Materials and Staples to Underweight. 

The firm said the shift reflects expectations for a stronger economy, persistent higher interest rates, and broader earnings growth, which it believes will favor Financials while pressuring Materials and Staples.

"We’ve become more positive on the Banks," Jefferies stated, noting that they account for 55% of the Financials sector’s weight. 

Several factors are said to support the upgrade, including "higher rates for longer," a strong track record of earnings beats, and a "better economy and M&A backdrop."

Jefferies adds that the sector is also "the second cheapest group in small caps," with particular preference given to Banks, Consumer Finance, and FinTech.

Conversely, Materials has been downgraded from Overweight to Underweight due to a challenging outlook. 

"JEF analysts see weaker commodity prices in ’25, which will hurt the sector," the firm explained. 

Additionally, Materials are exposed to the housing market, which faces "significant headwinds" from mortgage rates remaining above 7%. Jefferies also warned that "earnings growth in the 2nd half seems lofty in our opinion; we see estimate cuts ahead."

Staples also moves to Underweight, with Jefferies highlighting a less favorable environment for the sector in an improving economy. 

"When the economy improves as shown by Leading Economic Indicators increasing on a YoY basis, the sector tends to trail."

Additionally, Jefferies’ Food analyst "sees headwinds for the Food industry in ’25," which represents 33% of the sector. Higher interest rates and a preference for small-cap outperformance in 2025 also pose challenges.

Beyond these changes, Jefferies maintains Overweight ratings on Health Care, Industrials, and Energy, while remaining Market Weight on Real Estate and Technology. Discretionary, Communication Services, and Utilities stay at Underweight.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.