JEF SMID-Cap Strategy—Look Across Sectors With Focus on Rate Hikes

Research evidence excerpt

JEF SMID-Cap Strategy—Look Across Sectors With Focus on Rate Hikes

USA | Equity Strategy EquityJuneResearch18, 2026

STRATEGY NOTEJEF SMID-Cap Strategy—Look Across Sectors

With Focus on Rate Hikes

Fed delivered a "hawkish" tone at meeting with probability of hike coming Three OWs, three UWs, and good chunk of

weight in MW camp

in December. Six months before hike, see Cyclical sectors outperform on Sector Index Weight

median basis, Health Care & Tech lag. Sector dispersion higher than average Overweight 40.3

with Industrialis most-expensive, Comm Services cheapest, but still too many Financials 16.2

nonearners in group. Big uptick in Energy's 26 growth rate, but lower oil hurts Discretionary 7.8

group. Q2 '26 2nd best three-month time-frame for Tech, weaker performance

Health Care 16.2

ahead.

Market Weight 49.2

Staples 1.6Are rate hikes coming? We looked at sector performance six-months prior to hikes: The tone from

the Fed shifted quite a bit with the handoff from Powell to Warsh with the market now looking at a Info Tech 18.9

hike by December. We went back to '85 and found six periods when the Fed raised rates and looked Real Estate 5.1

at performance six-months prior to the hike. A few observations based on median performance: Industrials 19.0

Energy was by far top dog at almost 17%, but performance was extremely volatile. The Materials 4.6•

Jefferies house view is that we see more upside in Nat Gas than Oil and remain UW the group. Underweight 10.6

Materials also had a very good showing at 9.6% with three periods seeing double-digit gains,• Energy 5.4

two were in the red. We are MW and acknowledge the potential for a commodity super-cycle

Comm Serv 2.5 driving the group, but with housing being a decent slug of the group, higher rates could offset