Jefferies equity strategist Steven G. DeSanctis on Tuesday lifted the firm's rating on financial stocks to overweight from market weight in a reaction to bearish sentiment around the sector and the prospect of higher interest rates. "Sentiment is downright awful," he said. "When flows are this bad, the group rebounds and delivers better than average performance." The sector offers cheap valuations currently and may be helped by GDP growth of 4% next year. "We think '22 earnings numbers are very conservative and should move up, keeping the revision ratios above average," DeSanctis said. M&A activity remains at record levels and could boost performance. Among the stocks in the group, Jefferies spotlighted Ares Management /zigman2/quotes/202624618/composite ARES +2.01% , Carlyle Group /zigman2/quotes/200142014/composite CG +1.36% , First Cash Inc. /zigman2/quotes/208051748/composite FCFS -0.46% , Hancock Whitney /zigman2/quotes/208577715/composite HWC +2.18% , LPL Financial /zigman2/quotes/202092656/composite LPLA -0.66% , OneMain Holdings /zigman2/quotes/202909976/composite OMF +0.63% , Signature Bank /zigman2/quotes/204403715/composite SBNY +5.08% , SLM Corp. /zigman2/quotes/205828282/composite SLM +1.25% , Sterling Bancorp , Western Alliance Bancorp /zigman2/quotes/206020866/composite WAL +1.88% and Wintrust Financial /zigman2/quotes/207938027/composite WTFC +1.61% . The SPDR Regional Banking ETF is up 30.9% so far this year, compared to a rise of 16.6% by the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.05% .