“
”Markets in Focus
Timely analysis of market moves and sectors of opportunity
BY MATT ORTON, CFA, AND JOEY DEL GUERCIO, CFA1
Consider high-quality artificial intelligence-related companies across information technology, communication services, and industrials where valuations have compressed, creating potential opportunities for diversification.
Look for signs of rotation beneath the surface in areas such as small caps (particularly regional banks and biotechnology), financials, and industrials (particularly aerospace/defense, airfreight/logistics and construction/engineering).
Watch for sticky inflation that fuels increasingly positive correlation between stocks and bonds to enhance the importance of having additional diversifiers such as gold and select international equities.
With the December Federal Open Market Committee (FOMC) meeting in the rearview mirror and earnings wrapped up, all the major known market catalysts are done for the year. While markets have yet to see much of the seasonal strength that is typical of November and December, the S&P 500 Index appears poised to end 2025 up around 17% to 18%, capping three consecutive years of 15% annual returns. The index has done this only nine times since 1928.2
The S&P 500 also has doubled, rising more than 100% since the beginning of this bull market on Oct. 12, 2022. As investors take stock at year’s end, our view hasn’t changed: We remain optimistic on equities into next year, predicated on a rare cocktail of cooperative monetary policy paired with robust fundamentals and fiscal stimulus providing a tailwind to growth.
Last week, however, was another example of how volatile and fickle this market can be. Whether it’s expectations around the path forward for monetary policy or something that challenges the durability of the artificial intelligence (AI) trade, markets have been in a “sell first and ask questions later” state of mind. This is amplified by the urge to solidify calendar-year performance. Positioning metrics are now more balanced, valuations have compressed across the AI complex, and investors remain optimistic going forward. That could create opportunities to consider leaning into the highest-quality AI stocks as well as what looks like the start of a cyclical rally.
It's been three good years for large-cap stocks
S&P 500 calendar year and cumulative returns since 1950
Source: Bloomberg, as of 12/19/2025.
The Consumer Price Index (CPI) was last week’s biggest surprise, but U.S. Federal Reserve (Fed) Chair Jerome Powell was clear at December’s FOMC meeting that the committee would look through what he characterized as “technical” measurement noise in the data. Due to measurement challenges, there was perhaps just a bit of signal and mostly noise from the CPI data. The next two to three months could help clarify whether this is the result of measurement problems or the start of a broader downshift.
The payroll report was equally unhelpful in providing a signal going forward, but the real takeaway was that the unemployment rate rose to 4.6% in November, the highest level since 2021. Rising unemployment and disinflation both bolster the case for a dovish Fed, but expectations didn’t change too much, which highlights the noise we’re dealing with. We believe the Fed will cut interest rates twice next year, likely starting in June. Overall, we think the likely direction of monetary policy remains dovish, which would be constructive for risk assets.
The state of the AI trade also remains in focus with financing concerns continuing to receive a disproportionate amount of airtime. The market is unpredictable and noisy in the short term, and we view recent flash moves as potential long-term opportunities.
At the same time, we strongly favor being adequately diversified. It’s no longer true that it’s just AI driving the market higher: The S&P 500® Equal Weight Index has outperformed the market-capitalization-weighted S&P 500 by about 1.2% since the Nov. 20 low. Plenty is working in this market and there are breakouts for investors to look at now.
AI-exposed sectors have outperformed this year, but gains have been bored
2025 year-to-date S&P 500 sector returns
Source: Bloomberg, as of 12/19/2025.
With no further catalysts expected through the end of the year, perhaps the market can build on its positive momentum from the end of last week.3 The market chop beneath the surface over the past two months has been painful, especially around the AI trade, but we’re encouraged that headline volatility remains low and cyclicals have performed well. Banks have been an area of strength globally; small caps continue to exhibit bullish price action; and transportation stocks have surged higher. We believe recent weakness across the technology and AI complex was largely driven by stretched sentiment and positioning rather than actual fundamentals. If we see dip buyers return across some oversold parts of the market, including some of the mega-caps, that could set up a rally into 2026. We remain optimistic looking into next year, but this is a time for investors to think about setting themselves up for success. Here are a few reminders from our 2026 outlook that are most topical right now:
Keep pushing back against the narrative of an AI bubble. Recent choppiness across the AI trade has been painful, and don’t expect the rising tide to lift all boats going forward. That said, earnings and strong guidance last week from a producer of computer memory and data storage components provided tangible confirmation that demand tied to data centers and memory pricing remains robust. Additionally, macroeconomic data showed resilience across the economy with inflation and labor market dynamics starting to cool. This helped investors feel more comfortable wading back in, and the first weekly gain for government bonds this month added to more constructive price action. We have consistently pushed back against the narrative of an AI bubble, and we continue to advocate leaning into risk, particularly through a select group of AI winners. Some of our key megatrends for next year include growth in robotics (think defense and factory automation) and the need for more diverse sources of power, all of which are positioned for growth by the continued adoption of AI models globally. There are plenty of high-quality AI-related companies across information technology, communication services, and industrials where valuations have compressed meaningfully, providing potential opportunities for investors looking to better diversify their exposure.
Rotation: Think small. Don’t expect a miraculous broadening of the market. Index concentration largely reflects earnings per share (EPS) growth and EPS contributions, and a break would cause meaningful pain across the market. Rather, look for rotation beneath the surface that leads to market concentration peaking and gradually changing. We have been constructive on small caps in the fourth quarter, especially in regional banks and biotechnology. A key for 2026 would be a rebound in earnings growth that has been lacking in past false starts over the years. We also continue to favor financials across the market-cap spectrum given capital markets activity that we expect to remain robust, more mergers and acquisitions, and a benign credit environment. Industrials remain a key area of focus once again in 2026 given the continued strength in the aerospace and defense trade as well as a breakout in airfreight and logistics and construction and engineering, all of which are expected to benefit from the One Big Beautiful Bill Act.
Diversifying beyond a core growth portfolio. Sticky inflation that fuels an increasingly positive correlation between stocks and bonds could underscore the importance of having additional diversifiers. This is why we remain optimistic on gold and select international markets in 2026. The decade-plus of international equity underperformance relative to the United States is normalizing, and there could be distinct diversification benefits across both developed and emerging markets. This is not the time to fade the strong gains of global equities in 2025. Instead, we favor considering trades that stand to benefit from current fundamentals and the kind of supportive regulatory and monetary policy that we’re seeing from European and Japanese banks.
Additionally, we remain constructive across emerging markets — they are meaningfully underrepresented in global indices relative to their contributions to growth to gross domestic product (GDP). This presents possible room for gains outside of the biggest AI beneficiaries like Korea and Taiwan. We believe emerging markets like India that underperformed the broad complex in 2025 also look attractive from a fundamental perspective and could offer strong diversification characteristics — the rolling 6-month correlation between the MSCI India Index and the S&P 500 sits at about 0%.
1 Matt Orton, CFA, is Chief Market Strategist at Raymond James Investment Management. Joey Del Guercio, CFA, is Research Associate for Market Strategy at Raymond James Investment Management.
2 Unless otherwise indicated, all data cited is sourced from Bloomberg as of Dec. 12, 2025.
3 Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce
return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Definitions
Artificial intelligence (AI) — A technology that enables computers and machines to simulate human learning, comprehension, problem solving, decision making, creativity and autonomy. AI 2.0 refers to companies in industries that are poised to benefit from the growth of AI because they provide either the components, services, or power needed to run AI servers.
Breadth — The relationship between the median and the mean of a market index. When a few data outliers result in a mean that is substantially larger (or smaller) than the median of the full data set, then the performance of the entire index is being driven by a “narrow” selection of companies. An index supported by “broad” market movements is one where the median is closer to the mean. Market breadth is said to be narrow when a smaller number of more extreme outliers have driven the mean of an index further from its median.
Capital expenditures/capex — Monies used by a company to buy, improve, or maintain physical assets such as real estate, facilities, technology, or equipment, and may include new projects or investments.
Concentration — The extent to which investments in a portfolio, group of portfolios, industry, sector, index, or particular geography or clustered in groups that share specific factors or other characteristics.
Consumer Price Index (CPI) — Measures the change in prices paid by consumers for goods and services. The U.S. Bureau of Labor Statistics bases the index on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 75 urban areas across the country from about 6,000 households and 22,000 retailers.
Correlation — The degree to which two securities or variables move in relation to each other. Measurements of rolling correlation consider averaged correlation data for a set interval over a set period of time.
Cyclical stocks — Stocks with prices influenced by macroeconomic changes in the economy and are known for following the economy as it cycles through expansion, peak, recession, and recovery.
Disinflation — A temporary slowing of the pace of price inflation, which typically happens when the inflation rate is marginally lower over the short term. Disinflation refers only to the rate of change in the rate of inflation. In this, it is distinct from inflation and deflation, which describe the direction of prices.
Dovish, hawkish, and centrist — Terms used to describe the monetary policy preferences of central bankers and others. Doves tend to support maintaining lower interest rates, often in support of stimulating job growth and the economy more generally. Hawks prioritize controlling inflation and may favor raising interest rates to reduce it or keep it in check. Centrists tend to occupy the middle of the continuum between tight (hawkish) and loose (dovish) monetary policy.
Earnings per share (EPS) — A company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability.
Fade — An investment strategy of ignoring or trading against a prevailing trend in the market.
Federal Open Market Committee (FOMC) — A committee of the U.S. Federal Reserve that sets monetary policy. It consists of 12 members: the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis. The FOMC holds eight regularly scheduled meetings per year at which it reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
Fiscal policy — The tax collection and spending a government uses to influence its country’s economy.
Gross domestic product (GDP) — The total value of goods and services provided in an economy during a specified period, often one quarter or one year.
Macroeconomic — Relating to the branch of economics that focuses on seeking to understand the interactions between the markets, businesses, governments, and consumers that make up an entire economy.
Market capitalization / market cap — The total dollar market value of a company’s outstanding shares of stock.
Mega-cap stocks — The largest publicly traded companies as measured by market capitalization. Generally, this refers to companies with market capitalizations over $200 billion.
Megatrend — A widespread and long-term macroeconomic, technological, social, environmental, political, or other change that may develop slowly at first but that has a major, ongoing impact once it gets underway. Megatrends are distinct from smaller trends in business, economic, or other spheres of activity that have less far-reaching or enduring effects.
Memory pricing — The cost of computer chips, hardware, and software needed to create and run artificial intelligence capabilities.
Monetary policy — The decisions made by central banks to raise or lower benchmark interest rates or otherwise tighten or loosen credit to influence an economy’s growth, inflation, or employment levels.
One Big Beautiful Bill Act — An act passed and signed into law in July 2025 that raised the U.S. debt ceiling by $5 trillion, made permanent tax cuts created by the Tax Cuts and Jobs Act of 2017, and changed a wide range of other aspects of federal tax policy, making changes to health insurance legislation, phasing out or reducing credits for clean energy production or use, and removing tax benefits for illegal immigrants.
Payroll report, officially known as the Employment Situation Summary — A monthly U.S. Bureau of Labor Statistics (BLS) report tracking nonfarm payroll employment and the national unemployment rate, with data on changes in average hourly earnings, and job trends in public and private sectors of employment. The report is based on surveys of households and employers.
Positioning — Assessments of whether professional investors are, on the whole, bullish or bearish on a particular security, industry, sector, market capitalization or other area of the market, as reflected by the extent to which they are invested in the area of the market in question.
Price action — The movement of security prices over time.
Risk assets — Investments such as equities, commodities, high-yield bonds, real estate, and currencies, where the value may rise or fall due to fluctuating interest rates, changes in credit quality, default risks, supply and demand disruption, and other factors.
Rotation — The movement of investments in securities from one industry, sector, factor, or asset class to another as market participants react to or try to anticipate the next stage of the economic cycle
Seasonality — Predictable changes that occur over a one-year period in a business, market, market sector, or economy based on the season, including calendar or commercial seasons.
Sticky — Measured data that is slow to change, in contrast to faster-changing or more variable data.
Tailwind — An event or market force that exerts a positive influence on an investment’s performance.
Indices
S&P 500 Index — Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
S&P 500® Equal Weight Index — the equal-weight version of the S&P 500. It includes the same constituents as the capitalization-weighted S&P 500, but each company in the S&P 500 Equal Weight Index is allocated a fixed weight, or 0.2% of the index total at each quarterly rebalance.
MSCI India Index — Measures the performance of the large- and mid-cap segments of the Indian stock market. The index covers approximately 85% of the Indian equity universe.
M-857296 Exp. 4/22/2026
BY MATT ORTON, CFA, AND JOEY DEL GUERCIO, CFA1
Our outlook on the market remains optimistic — the S&P 500 Index has reached new highs, fundamentals are strong, and monetary policy is easing. However, a healthy rotation is underway, and investors may consider shifting from technology and AI trades, seeking opportunities in value, cyclical, and quality sectors.
The U.S. Federal Reserve’s recent dovish actions are supportive of risk assets. Uncertainty remains around future interest rate cuts and leadership, but overall monetary conditions remain favorable.
Diversification remains important; areas of opportunity include small-caps, international equities, and sectors such as healthcare and financials in 2026.
Last week, the S&P 500 Index reached its 37th all-time high of the year, largely propelled by a more dovish than expected December Federal Open Market Committee (FOMC) meeting.2 We remain bullish into 2026, predicated on the rare but current backdrop of strong fundamentals paired with easing monetary policy.
However, it’s clear that there’s growing fatigue around the artificial intelligence (AI) trade, with investors seeking to allocate trailing gains into pockets of value. Still, investor sentiment has been broadly on the mend, as noted in the American Association of Independent Investors (AAII) sentiment survey, which shows the ratio of bulls to bears at its highest level since January. Capital markets are firing on all cylinders, which speaks to CEO confidence in the backdrop, as also seen by the takeaways from last week’s Goldman Sachs U.S. Financial Services Conference. Credit fears have largely retreated from the investor psyche, consumer spending is resilient, and the macroeconomic backdrop is solid. It seems that the story remains the same moving forward; investors are simply trying to determine the cast. The rotation taking place is moving away from technology and toward general cyclicality, value, and quality. This is healthy, overdue, and promising for the continuation of this bull market.
The December FOMC helped propel the market to a fresh all-time high
S&P 500 Index since the beginning of 2024
Source: Bloomberg, as of 12/12/2025.
Last week’s 25-basis point (bp) cut came as expected, but the press conference, the summary of economic projections (SEP), and accompanying statement were more dovish than anticipated.
The biggest surprise was the announcement that the U.S. Federal Reserve (Fed) will initiate shorter-term Treasury purchases within the next 30 days. While Fed Chair Jerome Powell emphasized that these purchases were solely intended to maintain ample bank reserves in the system, they will still increase liquidity. This combined with expectations for this program’s continuation broadly supports risk assets.
It’s also worth noting that the SEP median rate projection remained unchanged from September, which assumes one cut for 2026. This is at odds with market expectations as the futures imply approximately 2.25 cuts in 2026. We agree and see two cuts for next year. The December FOMC meeting was likely the final rate cut with Powell as chair since the Fed has stated it is “well-positioned” and expectations for a near-term cut have dwindled. The first full cut isn’t priced in until June of next year, which will be the first FOMC meeting without Powell at the helm — obviously, the market assumes that the next Fed chair will be incrementally more dovish than Powell.
Adding to optimism surrounding further rate cuts in the second half of next year were public comments from Fed officials, most notably from Federal Reserve Bank of Chicago President Austan Goolsbee. After dissenting in favor of a hold at last week’s FOMC meeting, he changed course with comments alluding to the fact that he is not hawkish on rates. It appears that Goolsbee is worried about inflation and saw no harm in holding but if disinflation prevails, it’s clear that he leans more dovish. While there are still downside risks to the labor market, we believe that the upside risk to inflation is emerging as a priority. Powell believes that the uptick in goods inflation because of tariffs will be short-lived. If the services inflation remains contained and the labor market shows no deterioration, the markets will likely anticipate additional rate cuts.
Sentiment around the AI trade appears to be waning. Investors are looking to lock in gains heading into year-end, and portfolios are churning. But make no mistake: AI is here to stay. The fundamentals supporting the companies most levered to AI are real and robust and we believe that investors should consider maintaining exposure to this trend. Moreover, we see continued downside in the AI winners as a potential opportunity. While some companies are reporting gains, we would recommend waiting for the dust to settle and to be selective about which stocks to lean into going forward. We continue to favor the “AI 2.0” names, companies involved in the construction and engineering of data centers and their components, as favorable ways to capitalize on hyperscaler capital expenditures, which show no signs of slowing down.
We remain optimistic that the bull market will continue. Corporate fundamentals are improving into next year, economic growth remains robust, uncertainty has largely subsided, and monetary policy is easing. That said, investors should focus on positioning into the new year and focus on building diversified portfolios. Rotation is the lifeblood of a bull market, and we’re finally starting to see substantive moves away from some of yesterday’s winners. While seemingly every Bloomberg article features a strategist calling for a rotation, we do not believe there’s a case for moving away from U.S. large caps. AI remains and maintaining an allocation to the names most exposed (e.g., the Magnificent Seven) is part of being sufficiently diversified. Gold looks primed to hit another all-time high. Small-caps are at all-time highs. International relative performance is about as good as it’s been in decades. 2025 has shown the value of being diversified and 2026 may as well. Furthermore, active management has a confluence of tailwinds worth highlighting: 1) breadth is expanding, and 2) quality is starting to outperform. This is shown by the S&P 500 Quality Index outperformance to the broader index by 1.6% quarter to date, and outperformance of the S&P 500 Growth Index by 2.0% in the same timeframe. Selectivity and diversification are back in style. Below are some of our areas of interest heading into the new year:
Small-caps. As breadth expands and investors contemplate where to shift, we believe the case for investing in small-cap stocks is strong. The current narrative in the market — easing monetary policy coupled with strong economic growth — bodes well for small-caps, providing a boost to their earnings growth trajectory. Many investors remain underallocated, and the continued pickup in relative performance may help inspire inflows.
International equities. Last Friday, when the major U.S. indices (small-caps included) were down by more than 1%, the MSCI ACWI (All Country World Index) ex USA Index moved higher. We believe the case remains for maintaining adequate international exposure, which has seen its best relative year since 2009.
Sectors in focus: healthcare and financials. The attention that the healthcare and financials sectors have received recently is meaningful. Both sectors are largely detached from AI, providing diversification benefits during rotations. Both sectors also have attractive potential investment opportunities in the small-cap space. We believe that biotechnology will continue to benefit from technological innovation, deregulation, and an uptick in mergers and acquisition (M&A) activity as largecap biopharma patent cliffs approach. Regional banks may also provide opportunities into the next year with the bull case largely predicated on a still-steep yield curve, industry consolidation, and robust economic growth. We believe that large-cap healthcare is attractive, but favor certain verticals (like pharmaceuticals and medical devices) over others (like managed care), and large-cap financials may offer similar opportunities to those seen in regional banks.
There's been a shift in market leadership
Index returns since the end of October
Source: Bloomberg, as of 12/12/2025.
Monetary policy and macroeconomics are in focus this week as 15 central banks host meetings across the globe, including six Group of 10 banks. The most important to watch are: the European Central Bank (which is expected to hold rates), the Bank of England (expected to cut rates), and the Bank of Japan (expected to raise rates). Keeping things busy at home, there’s plenty of Fed commentary to build on last week’s cut. Investors also will finally get to see some of the delayed data from the government shutdown when the November Non-Farm Payroll data and the November Consumer Price Index are released this week. We will also see data from the University of Michigan Index of Consumer Sentiment survey, retail sales data, and existing home sales data.
1 Matt Orton, CFA, is Chief Market Strategist at Raymond James Investment Management. Joey Del Guercio, CFA, is Research Associate for Market Strategy at Raymond James Investment Management.
2 Unless otherwise indicated, all data cited is sourced from Bloomberg as of Dec. 12, 2025.
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce
return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Definitions
American Association of Independent Investors (AAII) Sentiment Survey — conducted weekly, a survey that offers into the opinions of individual investors by asking them their thoughts on where the market is heading in the next six months.
Artificial intelligence (AI) — A technology that enables computers and machines to simulate human learning, comprehension, problem solving, decision making, creativity and autonomy. AI 2.0 refers to companies in industries that are poised to benefit from the growth of AI because they provide either the components, services, or power needed to run AI servers.
Capital expenditures/capex — Monies used by a company to buy, improve, or maintain physical assets such as real estate, facilities, technology, or equipment, and may include new projects or investments.
Consumer Price Index (CPI) — Measures the change in prices paid by consumers for goods and services. The U.S. Bureau of Labor Statistics bases the index on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 75 urban areas across the country from about 6,000 households and 22,000 retailers.
Drawdown — A decline in the returns of a security or group of securities, as measured over a period from the peak of returns to their trough.
Federal Open Market Committee (FOMC) — A committee of the U.S. Federal Reserve that sets monetary policy. It consists of 12 members: the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis. The FOMC holds eight regularly scheduled meetings per year at which it reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
Fed speak — a technique for managing investors’ expectations by making deliberately unclear statements regarding monetary policy to prevent markets from anticipating, and thus partially negating, its effects.
Gross domestic product (GDP) — The total value of goods and services provided in an economy during a specified period, often one quarter or one year. Also known as headline GDP, nominal GDP is not adjusted for inflation.
Group of 10 — also known as the G10, consists of 11 industrialized nations that meet at least annually to work together on matters of international finance. The member nations are Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States, with Switzerland playing a minor role.
Guidance — Statements from the managers of publicly traded companies that indicate whether they expect to realize near-term profits or losses and why.
Hawkish, dovish, and centrist — Terms used to describe the monetary policy preferences of central bankers and others. Hawks prioritize controlling inflation and may favor raising interest rates to reduce it or keep it in check. Doves tend to support maintaining lower interest rates, often in support of stimulating job growth and the economy more generally. Centrists tend to occupy the middle of the continuum between tight (hawkish) and loose (dovish) monetary policy.
Hyperscalers — The largest cloud computing providers that can provide massive amounts of computing resources and storage at enterprise scale.
Macroeconomic — Relating to the branch of economics that focuses on seeking to understand the interactions between the markets, businesses, governments, and consumers that make up an entire economy.
Magnificent Seven — The seven largest stocks by market capitalization in the S&P 500 Index, as of Dec. 31, 2024. Collectively they made up more than 25% of the market capitalization of the entire index. They are Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla.
Market capitalization, or market cap — The total dollar market value of a company’s outstanding shares of stock.
Moving average — A calculation that takes the arithmetic mean of a given set of data points measured over specific intervals of time.
Payroll report, officially known as the Employment Situation Summary — A monthly U.S. Bureau of Labor Statistics (BLS) report tracking nonfarm payroll employment and the national unemployment rate, with data on changes in average hourly earnings, and job trends in public and private sectors of employment. The report is based on surveys of households and employers.
Personal Consumption Expenditures (PCE) Price Index — a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The PCE price index, released monthly by the U.S. Department of Commerce Bureau of Economic Analysis, is known for capturing inflation or deflation across a wide range of consumer expenses and reflecting changes in consumer behavior.
Positioning — Assessments of whether professional investors are, on the whole, bullish or bearish on a particular security, industry, sector, market capitalization or other area of the market, as reflected by the extent to which they are invested in the area of the market in question.
Risk-on — Market sentiment that is typically fueled by a strong growth environment in which good news supports a bullish outlook and investor expectations of favorable risk/reward ratios.
Summary of economic projections (SEP) — An analysis produced following meetings of the Federal Open Market Committee and includes meeting participants’ projections of the most likely outcomes for real gross domestic product growth, the unemployment rate, and inflation for a forward-looking three-year window and over the longer run.
University of Michigan Index of Consumer Sentiment is based on monthly telephone surveys in which at least 500 consumers in the continental United States are asked 50 questions about what they think now and what their expectations are for their personal finances, business conditions, and buying conditions. Their responses are used to calculate monthly measures of consumer sentiment that can be compared to a base value of 100 set in 1966.
Indices
MSCI ACWI (All Country World Index) ex USA Index captures large- and mid-cap representation across 22 of 23 developed markets countries (excluding the United States) and 24 emerging markets countries. With 2,056 constituents, the index covers approximately 85% of the global equity opportunity set outside the United States. Developed markets countries include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the U.K. Emerging markets countries include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
Nasdaq 100® — a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock market. It is a modified capitalization-weighted index.
Russell 2000® Index — measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 7% of the total market capitalization of the Russell 3000® Index.
S&P 500 Index — Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
S&P 500® Equal Weight Index — the equal-weight version of the S&P 500. It includes the same constituents as the capitalization-weighted S&P 500, but each company in the S&P 500 Equal Weight Index is allocated a fixed weight, or 0.2% of the index total at each quarterly rebalance.
The S&P 500 Growth Index measures growth stocks within the S&P 500 Index using three factors: sales growth, the ratio of earnings change to price, and momentum.
The S&P 500® Quality Index is designed to track high-quality stocks in the S&P 500 by quality score, which is calculated based on return on equity, accruals ratio, and financial leverage ratio.
London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2024. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
M-855309 Exp. 4/16/2026
