Liz Ann Sonders on 2026 Market Outlook: Rotations, Opportunities, and Volatility Drivers

2026 Market Outlook

• 🎯 While history isn't a perfect guide, three strong up years in a row are often followed by another decent year, though 2026 is expected to be choppier.
• 🔄 The year will likely be characterized by swift rotations under the surface, with notable leadership shifts continuing.

Shifting Market Leadership

• 🔄 Leadership shifts are moving away from mega-cap secular growth names towards cyclicals like financials and consumer cyclicals.
• 💡 There are likely legs to recent leadership areas such as healthcare and financials, with broadening participation beyond just new tech.
• 📊 Even within technology, there's increasing dispersion, with companies like Western Digital, SanDisk, and Seagate showing strong price performance.

Understanding Performance Metrics

• 📈 It's important for investors to distinguish between a company's contribution to cap-weighted returns and its actual price performance.
• 🔍 While Nvidia is a top contributor to S&P returns due to its size, its price performance ranks lower, indicating a growing pool of opportunities.

Factors Driving Volatility

• ⚠️ The political angle, including rhetoric and proposed policy changes from the administration, will be a significant driver of volatility.
• 📊 Volatility will also stem from traditional fundamentals like earnings seasons, with a focus on profit margins and productivity statistics.
• ⚖️ Actions like taking stakes in companies or criticizing industries will contribute to the volatility equation.