How to play the outperforming financials sector as the second half of 2025 kicks off

CNBC

30-06-2025

(This is a wrap-up of the key money moving discussions on CNBC's "Worldwide Exchange" exclusive for PRO subscribers. Worldwide Exchange airs at 5 a.m. ET each day.) Investors heading into Monday's session were looking at financials as the sector outperforms. JPMorgan also breaks down its year-end outlook for stocks. David Zervos' outlook on financials David Zervos of Jefferies expects financials to be one of the best performing sectors in the second half of 2025. "I'm very optimistic on deal flow and a deregulatory story that starts to hit the energy sector and financial sector," said Zervos. " I think there is a story here with the SLR (Supplementary Leverage Ratio)." He added: "The administration is very keep on wrestling some regulator purview back into the administration … they want to see deals, they want activity and I think they are going to get it." SLR was established in 2014 as part of the Basel III reforms to monitor banks Tier 1 capital. Last week, big banks passed their most recent stress test, but those were reportedly less vigorous than previous years. Passing the stress test lest major banks to issue dividends to shareholders and announce stock buybacks. The dividend plans are expected to be announced this week. The financial sector is more than 26% higher year to date. JPMorgan 2025 year-end outlook; how to play defense sector Joyce Chang of JPMorgan has a S & P 500 forecast of 6,000 implying a 4% pullback from current levels. "I think we are in a range here, you have slower growth coming and we think higher inflation," said Chang. "You also have very steady retail demand and buybacks, we have been looking at $7 billion-$8 billion daily into equity markets. The technicals could squeeze this higher but we are on a stagflationary tilt here. I would careful calling for much higher market." She added on the headwind from tariffs and trade deals: "We are still looking an effective tariff rate that is 14% that is a $400 billion tax." On a sector level, Chang is bullish on defense and aerospace and said she sees more upside in the European players in the space. "What they are doing at NATO is historic (increasing defense spending), even though it is going to play out over a period of time." Since the June 13 Israel strike on Iran, The EUAD Select STOXX Europe Aerospace & Defense ETF and the ITA iShares US Aerospace & Defense ETF are trading very closely. Baidu releases 'Ernie' bot Chinese tech giant Baidu is scheduled to release it's "Ernie" open source large language model on Monday, seen by many as the biggest AI development out of China since the "Deep Seek" release in January. Dan Ives from Wedbush has high expectations, "We believe Baidu has built an impressive 'Ernie' that will send some potential shockwaves across the AI market and it speaks to China becoming more and more successful on the AI front. I don't expect a 'Deep Seek' moment but the early reads are positive." Kevin Carter of EMQQ Global said investors should also pay attention to Baidu's developments in the autonomous driving space with its "Apollo Go" robotaxi service. " AI and Ernie GPT are important to Baidu, but real-world physical AI is happening right now with robotaxis scaling at an incredible rate," said Carter. "Many analysts have reiterated bullish views on the autonomous mobility market where Waymo is the clear US leader. Baidu's 'Apollo Go' is neck and neck with Waymo in the self-driving car market and has given more rides so far than Waymo so far. Apollo Go also has significantly more room to grow as China has 145 cities with 1 million people versus only nine in the U.S ." U.S.-listed Baidu shares are 4% higher year to date.