Traders are increasingly betting that the Federal Reserve will raise interest rates at the end of this year and early 2027, and it is time to start looking at the sectors that will benefit.

Future markets are now pricing in about a 75% chance that the Fed will hike short-term rates by December. The market will probably get a better sense of timing after new Fed Chair Kevin Warsh gives his big speech at Jackson Hole Friday.

Which industries are poised to outperform? Stick with those who have done best so far this year. Oil stocks and other commodity-focused materials companies, as well as technology firms, have historically held up better during interest-rate hiking cycles since the mid-1990s, according to data from Barclays.

"Energy has been the most resilient beneficiary of the late-cycle backdrop," the Barclays strategists said. The State Street Energy Select Sector SPDR ETF is up more than 40% this year, led by big gains in top holdings ExxonMobil, Chevron and ConocoPhillips.

Investors shouldn't ignore materials companies either, as many of them could benefit from rising commodity prices across the board. Copper miner Freeport-McMoRan, a 2026 Barron's stock pick, is up more than 50% this year and trading at a record high. Other commodity-centric companies could keep rallying too.

"The materials sector has started to experience new upside momentum," said JC O'Hara, chief market technician for Roth in a report. "The commodity complex remains in a bull market, confirmed by the bullish price action in metals, agriculture and natural resources."

Ed Yardeni of Yardeni Research is bullish on materials too, citing the strength in both gold and copper prices. He says investors should also pile into tech stocks, which he believes have been unfairly punished due to higher long-term bond yields.

Yardeni argues that the market is overreacting to both macro concerns as well as worries about how much leading chip stocks such as Micron, Marvell Technology and SK Hynix have run up this year as their sales and profits have soared.

He noted that the semiconductor sector now trades at a lower price-to-earnings ratio than the S&P 500 and that the broader tech sector trades for just 21 times earnings estimates-despite an estimated earnings growth rate of 42%.

"Analysts keep raising the growth rate. Investors keep lowering the multiple," Yardeni wrote, adding that he continues "to view the AI selloff as an opportunity."

Kim Gailun, head of equity boutiques at Wellington Management, likes tech as well. She told Barron's that it is encouraging to see that the sector has performed so well even though the Magnificent Seven tech giants like Microsoft have lagged behind the broader market.

"This feels more generally like a stockpicker's market," she said. "Investors are going to be more discriminating in the next phase of the AI trade."

On the flip side, investors should probably avoid rate-sensitive sectors such as banks and consumer discretionary stocks as well as so-called bond proxies such as consumer staples, utilities and real estate. Those latter three sectors are known as being big dividend payers, but their yields would look less attractive compared with bonds if rates creep higher.

"Financials and traditionally defensive sectors have faced the greatest pressure as tighter financial conditions and rising discount rates weigh on earnings expectations and valuations," the Barclays strategists said.

That leaves healthcare as a bit of a wild card. The Barclays strategists think that the industry, which has rallied about 13% this year, could be due for a pullback given that it is traditionally defensive, dividend-oriented sector.

"Steady earnings become less attractive when the Fed signals that economic activity and aggregate demand is strong enough for a hike," the Barclays analysts wrote.

But Yardeni is bullish, noting that valuations are compelling (the sector trades for just 19 times earnings forecasts) and that both overall profits and margins are expected to improve. Favorable trial results for a cancer vaccine from Moderna and Merck, which ignited the two stocks, are another positive catalyst.

"We are overweight healthcare because we think the drug-development cycle is turning," Yardeni wrote.

That's a key point. Drug stocks typically lag when the Fed is raising rates because the companies have been viewed more as slow and steady income plays. But with the sector now starting to show signs of strong growth, healthcare may get a boost just like energy, materials and tech. Pharma can play offense in a portfolio instead of defense.