Rebalancing is an important discipline for investors right now: Charles Schwab's Liz Ann Sonders

Summary

Liz Ann Sonders explains that markets are in a rapid-fire rotation regime, with money shifting away from prior leaders like semis and hyperscalers toward defensive areas such as health care, dividend payers, and financials. She notes improving market breadth and recommends rebalancing strategies. She identifies health care, industrials, and materials as current opportunities and advocates for factor-based quality investing as a better approach than pure sector allocation.

• Rapid, short-term rotations dominate the market, driven by systematic and retail flows.
• Money is rotating away from semiconductors and previously away from hyperscalers.
• Defensive sectors like health care and dividend areas, plus financials, are attracting inflows.
• Market breadth has improved sharply, with 65% of S&P stocks outperforming the index in the last month versus 12% over the past year.
• Volatility-based rebalancing is recommended to trim winners and add laggards.
• Sector opportunities cited: health care, industrials (AI play), and materials (commodity cycle).
• Quality factor strategies (high interest coverage, strong balance sheets, stable margins) are preferred over traditional sector-only investing.