Andrew Slimmon on Tech Stock Valuations, Fed Policy, and Financials in 2026

Tech Stock Valuations and Earnings

• 💡 Tech stocks, particularly the "Mag 7," underperformed in Q4, leading to lower valuations at the start of 2026 compared to the previous year.
• 🎯 Despite underperformance, there are no signs of earnings problems for these large tech companies, suggesting a disconnect between fundamentals and stock prices.
• 🚀 The speaker suggests an opportunity to take advantage of the weaker performance in big tech stocks, anticipating a potential rotation back.

Investor Playbook and Market Rotation

• 📈 The current playbook suggests buying cyclicals based on anticipated Federal Reserve rate cuts and stronger nominal GDP.
• ⚠️ However, many industrial stocks have already priced in Fed cuts, and their valuations now depend on earnings actually materializing.
• 🔄 This contrasts with large tech stocks, which have strong earnings but saw their stock prices lag, hinting at a potential rotation back to tech.

Financial Sector Opportunities

• 🏦 Financial stocks are highlighted as an exception, trading at significant PE discounts despite strong performance.
• 📉 The market's caution stems from the memory of the 2008 financial crisis, creating a muscle memory effect.
• 🔑 Deregulation is seen as a catalyst for releasing capital, which is expected to drive multiple expansion and earnings growth for financial companies in 2026.

AI Capital Needs and Market Impact

• ❓ A significant question for 2026 is whether the market can absorb the capital required for AI investments, including IPOs, equity offerings, and debt.
• 💰 Lower stock buybacks due to AI investments could impact market liquidity.
• ⚡ While a large syndicate calendar might temporarily suck cash out of the market, it's not seen as a reason to be negative on the year overall.