The trend remains your friend if financials have been overweighted in your portfolio. Measured by one-year performance, this sector is red hot in absolute and relative terms, based on a set of proxy ETFs.

Tech is a close second for one-year sector returns. Goldman Sachs forecasts that the pair will hold on to their leadership positions in the near term. “Growth will drive technology share prices higher while change in growth will support the performance of financials,” David Kostin, a strategist at the bank, wrote last week. “We expect both sectors will outperform going forward, but for different reasons. The tech sector will benefit from robust expected sales growth relative to the rest of the market while the prospect of higher interest rates and the ability to return capital to shareholders will benefit financials.”

Perhaps, although financials took a hit yesterday – a day when the Federal Reserve advised that it would begin to wind down its quantitative easing policy “relative soon” by reducing the central bank’s $4.5 trillion balance sheet. “I expect an announcement of the onset of the balance-sheet reduction at the conclusion of the September meeting, effective on the first of October,” Carl Tannenbaum, chief economist at Northern Trust, told Bloomberg.

Despite Wednesday’s setback for financials, the rear-view mirror still looks impressive for these stocks. Financial Select Sector SPDR (XLF) has surged nearly 33% over the past 12 months through yesterday (July 27). Technology Select Sector SPDR (XLK) is in second place, posting a 27.9% total return for the trailing one-year window.

In both cases, the returns represent substantial premiums over the broad equity market’s performance, based on SPDR S&P 500 ETF (SPY), which is up 16.5% for the past year.

The lone loser for one-year performance in the sector race: Vanguard Telecommunication Services (VOX), which is down 5.4% vs. the year-earlier price.

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Reviewing a performance chart of the ten sector ETFs clearly shows that XLF and XLK have delivered outsized gains relative to their peers.

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Ranking the sector ETFs by price relative to 200-day moving average shows that tech’s upside momentum is second to none at the moment. XLK closed yesterday (July 27) at roughly a 12% premium over its 200-day average.

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