Broadening out market trade has legs, says Charles Schwab's Liz Ann Sonders

Summary

Liz Ann Sonders of Charles Schwab says the broadening-out market trade has legs, favoring international equities, small caps with a quality/profitable bias, equal-weight exposure, and cyclicals like materials and industrials. She argues market leadership is rotating away from the Magnificent Seven as earnings growth decelerates for prior tech favorites while other areas accelerate. She sees continued churn, dispersion, and lower correlations, which could benefit active managers, and says recent volatility is not alarming amid Fed and tariff uncertainty.

• Liz Ann Sonders says the market broadening trade has legs.
• She includes international equities and small caps in the broadening thesis.
• Within small caps, she prefers profitable/quality names and fades unprofitable ones.
• She says equal-weight outperformance has legs.
• She views the shift into materials and industrials as a healthy economic signal.
• She warns the Magnificent Seven can no longer be bought as a monolithic cohort.
• She expects more dispersion, lower correlations, and a better backdrop for active managers.
• She calls the recent volatility rise not alarming but sees continued churn.