A US equity strategist at Citi thinks a market rotation could soon give small-cap stocks a big boost.
Scott Chronert say in a new interview with CNBC that artificial intelligence (AI) trading remains attractive for now, but recommends greater exposure to small non-AI companies.
“The issue here is less about convictions and profits and more about the persistence of AI infrastructure trading, and that will be an ongoing discussion. If we look at the market setup, it’s quite simple. We want to have exposure to this Nasdaq component where the earnings momentum is so strong, but we want to undermine that by moving from one small cap to another. It’s probably the most leveraged non-AI trade and a broader trade. The other sectors – industrial, financial sector, consumer discretion – they all have storylines that we can talk about, but we do think there is probably some upside to this down-cap trade.”
The strategist also says his outlook for the S&P 500 through 2027 is bullish.
“Looking at the overall S&P lineup, we are very comfortable with our earnings outlook ahead of expectations for this year. We are at 350. [earnings per share] for this year. The consensus is 341. We feel very good about our 350 and it could be conservative – 400 for next year [is] definitely line of sight.”
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