One of the best times to buy stocks is when Wall Street is overreacting to recent events. And right now, that news is the failure of Silicon Valley Bank and subsequent bailout of a handful of other financial institutions.

One way to profit from Wall Street’s knee jerk reaction is to buy regional bank stocks. During the past month, the iShares U.S. Regional Banks ETF (IAT) has lost a third of its value. It is now back to where it was three years ago, when the coronavirus pandemic all but shut down the global economy.

At that time, abandoning the banking sector was not an unreasonable response. Nobody knew how many lives COVID-19 would claim or how long it would be until it subsided. Under a worst-case scenario, we might have been dealing with a repeat of the Great Depression.

That fear caused IAT to nosedive three years ago. However, once it became apparent that the economy would not collapse it quickly rallied. One year after the outbreak of the pandemic, IAT hit an all-time high.

At the start of last year, IAT peaked near $70. But once the Fed started raising interest rates, it gradually fell back to $50 by the end of the year. I see no reason why it shouldn’t get back up to that price once the threat of a global banking crisis has dissipated.

Think Small

Another casualty of the Silicon Valley Bank failure is small-cap stocks. Most of them rely on regional banks for loans and deposits. If there is consolidation in the banking sector, a lot of small businesses may have trouble accessing growth capital for a while.

For that reason, Wall Street has sought shelter in the safety of big businesses that are preferred customers of national banks. If they need growth capital in the form of a loan or line of credit, they can get it.

Read this Story: Banking, Bailouts, and Behavioral Bias

That dynamic is visible in the relative performance of the small-cap Russell 2000 Index. Over the past month, it is down 7%. Meanwhile, the large-cap S&P 500 Index has gained 1%. Big tech companies are doing even better as evinced by the 5% rise in the NASDAQ Composite Index over the same span.

Since closing above $103 on March 3, the iShares Core S&P Small-Cap ETF (IJR) ended March 29 below $95. That is not as severe of a drop as regional banks stocks experienced. However, at that price it is back to where it was two years ago.

If you believe we are on the verge of a deep recession, then now would not be a good time to load up on small businesses. Many of them lack the financial resources to withstand a prolonged decline in sales.

But if you think that a recession will be averted, then small-cap stocks could rally strongly over the second half of this year. A return to the $120 price that IJR was trading at sixteen months ago would equate to a 25% gain over its recent price.

Grab Gas

Another victim of the Silicon Valley Bank failure is the energy sector. On March 6, the price of oil closed above $80 a barrel. Less than two weeks later, it fell below $67. Wall Street feared that a crisis in the banking sector might lessen economic activity, thereby driving down demand for oil.

By the end of March, oil was back above $70 a barrel. However, it is still well below the $120 price it hit last year after Russia’s invasion of Ukraine. I don’t expect it to revisit that level anytime soon, but I believe it will rise as we head into the summer and demand for gasoline escalates.

If I’m right about that, then the iShares U.S. Energy ETF (IYE) should perform well. Its top holdings are Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), and ConocoPhillips (NYSE: NYSE: COP). Combined, those three energy producers account for nearly half of the fund’s total assets.

On March 6, IYE closed just under $46. Eleven days later, it bottomed out a little above $40. Since then, it has recovered about half that loss but it still well below where it was trading earlier this year.

If you’re a conservative investor, you may want to consider spreading your money among all three of the funds mentioned above. That way, you can still make money if I’m wrong about one of the sectors and right about the other two.

If you are more aggressive, you can amplify a rebound in those sectors by purchasing a call option on each of those funds. A call option increases in value when the price of the underlying security goes up.

Regardless of how you choose to play it, I believe there is money to be made in those sectors. Wall Street’s fear will soon turn to greed, at which time each of them should rebound strongly.

Editor’s Note: The above article just alerted you to three outstanding ways to reap profits. But maybe you’re still spooked by market volatility. There’s a way to profit from uncertainty…and my longtime colleague Jim Pearce can show you how.

Jim Pearce is chief investment strategist of our premium publications Personal Finance, PF Pro, and Mayhem Trader. Through painstaking analysis, Jim has pinpointed one overlooked precious metal that could offer protection and massive profits, regardless of the ups and downs of global economies. Click here for details.