Gary Cohn

Cohn observes a distinct rotation where investors are "reevaluating the growth" of tech companies and moving capital into "traditional companies in America" like Walmart, J&J, Exxon, and Verizon, which are trading near 52-week highs. As high interest rates and input costs persist, investors are seeking safety and realized value over speculative growth. The market isn't exiting equities; it is simply moving to defensive, cash-flow-positive legacy firms. LONG traditional value names as the beneficiaries of this capital rotation. A sudden dovish pivot by the Fed could reignite the risk-on trade in high-growth tech, causing these defensive names to underperform.

Cohn points out that while the cap-weighted S&P 500 (dominated by Big Tech) was flat on the day, the "Equal Weighted Index" was up significantly (approx 6% recently). The market breadth is actually improving. The "pain" is localized in the over-owned mega-caps, while the average stock is performing well due to economic tailwinds. Buying the equal-weight index captures this broad strength without the drag of the correcting tech giants. LONG RSP to capture the rotation into the broader 493 stocks of the S&P. If the tech correction turns into a broader market panic, correlations will converge to 1, dragging the equal-weight index down with it.

Cohn observes a distinct rotation where investors are "reevaluating the growth" of tech companies and moving capital into "traditional companies in America" like Walmart, J&J, Exxon, and Verizon, which are trading near 52-week highs. As high interest rates and input costs persist, investors are seeking safety and realized value over speculative growth. The market isn't exiting equities; it is simply moving to defensive, cash-flow-positive legacy firms. LONG traditional value names as the beneficiaries of this capital rotation. A sudden dovish pivot by the Fed could reignite the risk-on trade in high-growth tech, causing these defensive names to underperform.

Cohn observes a distinct rotation where investors are "reevaluating the growth" of tech companies and moving capital into "traditional companies in America" like Walmart, J&J, Exxon, and Verizon, which are trading near 52-week highs. As high interest rates and input costs persist, investors are seeking safety and realized value over speculative growth. The market isn't exiting equities; it is simply moving to defensive, cash-flow-positive legacy firms. LONG traditional value names as the beneficiaries of this capital rotation. A sudden dovish pivot by the Fed could reignite the risk-on trade in high-growth tech, causing these defensive names to underperform.

Cohn observes a distinct rotation where investors are "reevaluating the growth" of tech companies and moving capital into "traditional companies in America" like Walmart, J&J, Exxon, and Verizon, which are trading near 52-week highs. As high interest rates and input costs persist, investors are seeking safety and realized value over speculative growth. The market isn't exiting equities; it is simply moving to defensive, cash-flow-positive legacy firms. LONG traditional value names as the beneficiaries of this capital rotation. A sudden dovish pivot by the Fed could reignite the risk-on trade in high-growth tech, causing these defensive names to underperform.

IBM's recent stock decline is temporary. The prior rally was driven by quantum computing developments (government quantum foundry deal) that remain on track. The current pause in enterprise infrastructure deals is due to temporary IT budget rebalancing: companies overspent on AI tokens and are now pausing, but they are beginning to question AI token ROI and may shift spending back to traditional enterprise infrastructure, benefiting IBM's core business.

The massive AI-driven data center infrastructure buildout in the US requires heavy machinery for construction, and Caterpillar is directly benefiting as a key supplier. Additionally, the 100% expensing provision in the new tax bill provides an extra tailwind for equipment purchases.

Cohn highlights "really strong economic tailwinds," specifically larger tax refunds (due to unchanged withholding tables) and a massive "Capex boom" in reindustrialization. Larger refunds mean more disposable income for the average American (bullish Consumer). The Capex boom, though slow due to zoning, guarantees a long pipeline of work for construction and industrial firms. LONG sectors tied to disposable income and physical infrastructure build-out. Persistent inflation could eat up the tax refund windfall before it translates to discretionary spending.

Cohn highlights "really strong economic tailwinds," specifically larger tax refunds (due to unchanged withholding tables) and a massive "Capex boom" in reindustrialization. Larger refunds mean more disposable income for the average American (bullish Consumer). The Capex boom, though slow due to zoning, guarantees a long pipeline of work for construction and industrial firms. LONG sectors tied to disposable income and physical infrastructure build-out. Persistent inflation could eat up the tax refund windfall before it translates to discretionary spending.