Market rotation itself is the new momentum trade, says Schwab's Liz Ann Sonders
Speakers
Liz Ann Sonders
— Chief Investment Strategist, Charles Schwab
Scott Wapner
— Host, CNBC
Summary
Liz Ann Sonders discusses market rotation as the new momentum trade, driven by institutional and systematic players. She highlights NVDA and Micron's outsized contribution to S&P expected earnings growth and the broadening AI/semiconductor ecosystem into peripheral and energy beneficiaries. She says the strong earnings story is currently trumping macro risks, but cautions that elevated earnings growth may lead to more middling forward equity returns.
- Market churn is part of an ongoing rotation theme.
- Rotation itself is described as the new momentum trade.
- CTAs, systematic funds, and long/short hedge funds amplify swift rotations.
- NVDA is 18% and Micron 14% of expected 2026 S&P earnings growth.
- AI ecosystem broadening extends below mega-caps into peripheral sectors and energy.
- Current market resilience is attributed to a compelling earnings story.
- Elevated earnings growth may eventually lead to more middling S&P returns.
Ideas
Rotation is the new momentum trade.
Rotation itself has become the new momentum trade, with institutional investors, CTAs, systematic funds, and long/short hedge funds playing rotations off each other's positions, driving swift market moves that may look like churn but reflect current market mechanics.
NVDA and Micron drive S&P earnings.
Index concentration has eased by weights, but earnings concentration remains extreme: NVIDIA contributes 18% and Micron 14% of expected 2026 S&P 500 earnings growth, making NVIDIA's report pivotal for the broad market.
AI ecosystem broadening to energy, smaller caps.
The AI/semiconductor ecosystem has become more diverse and broad, creating opportunities down the market-cap spectrum and in peripheral beneficiaries, including the energy space, as money seeks new objects beyond the Mag 7.
