Liz Ann Sonders Says “Rotation Is the New Momentum Trade.” Here’s Where Money Could Move Next
The AI trade is still running, but Wall Street's sharpest strategist says the real action has moved elsewhere. One industrial darling just dropped nearly 30% in a month, proving that the next safe harbor may not be safe at all.
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The day after the November votes, Liz Ann Sonders went on CNBC with a message for investors waiting on the next leg of the AI rally: market leadership keeps spreading out. “The setup is pretty good, but I expect to see the market continue its rotational flavor. We’ve been saying for a while, I think I’ve said it probably many times on your show, Scott, that rotation is the new momentum trade.”
What Rotation and Breadth Mean for Your Money
Rotation is money leaving one group of stocks and moving into another. Breadth measures how many stocks take part in a rally. A narrow market climbs on a few giants. A broad market lifts many sectors at once. Sonders expects breadth to keep improving even if AI cools: “My base case is we’re going to continue to see rotation, but enough improvement in breadth that even if you continue to see the wind down of this AI-driven trade, you’ve got so many other segments of the market sort of playing catch up.”
Energy, Copper and Value Funds Are Leading the Catch-Up
The data backs her up. Year to date, Exxon Mobil (NYSE:XOM | XOM Price Prediction) is up 43.36%. Freeport-McMoRan (NYSE:FCX) has gained 60.85% over the past year. The Vanguard Value ETF (NYSEARCA:VTV) is up 22.44% in 2026, and the iShares Russell 2000 ETF (NYSEARCA:IWM) has added 15.55%.
Earnings explain the gains. Exxon generated $19.10B of third-quarter free cash flow, up 215%, and set a $20B buyback target for 2027. Freeport realized $6.54/lb for copper, compared with $4.68/lb a year earlier, and projects 2027 copper sales of 3.7B lbs.
Banks are joining in. JPMorgan Chase (NYSE:JPM) rose 6.48% over the past month after third-quarter revenue grew 8% to $50.9 billion. Its CFO also warned that conditions “where essentially every part of the franchise is beating records, are not typical by historical standards.” A positive 10-year minus 2-year Treasury spread of 0.34% also helps lenders. Sonders welcomed the mix: “We’re happy to see that broadening out be inclusive of the more cyclical side of things and not just the defensive side.”
Caterpillar Shows How Fast Rotation Can Turn
Caterpillar (NYSE:CAT) is a warning for anyone who treats cyclicals as a safe harbor. In its third-quarter earnings release, revenue rose 17.3% to $20.68B, Power Generation sales climbed 30% on data center demand (we covered seven companies riding that same power, cooling, and networking expansion in a free AI infrastructure report), and the backlog hit a record $78 billion. The stock still fell after Reuters reported that the company stuck to its annual sales forecast amid cost pressures. Shares are down 29.94% over the past month and up only 4.37% this year.
An industrial tied to the AI expansion can trade like an AI stock. Leaders are also shifting. Exxon fell 7.07% this past week, and Freeport is off 13.29% over the past month.
Retirement Accounts Heavy on Big Tech Need a Second Look
Market-cap-weighted index funds hold most of what has grown the most, so years of AI gains can shift core 401(k) funds toward a few megacaps. That tilt matters most for hands-on savers. Fidelity found that more than 40% of workers in their 50s and early 60s are do-it-yourself 401(k) investors who choose their own allocations.
For those investors, a quick check of how much overlap exists across their funds is a useful research step. Broad value and small-cap funds cost little: VTV’s expense ratio is 0.03% per its Vanguard fact sheet, and IWM’s is 0.19%. Small caps can lag for long periods, though. IWM gained just 17.63% over five years.
Catalysts to Watch Before Year-End
Freeport expects to decide on its roughly $4.5B Baghdad expansion in Q4 2026. Caterpillar plans to share more about 2027 next quarter, and its CEO said he would expect the company to “claw our way off the bottom of that margin target range.” At JPMorgan, the CEO said of deal activity, “The pipeline is like an accordion. It can open and close pretty quickly.” If breadth keeps improving while those signals hold, Sonders’s rotation case gets stronger.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
