Brian Belski Returns!

The equity market faces a transition as earnings-driven growth replaces momentum-based multiple expansion, necessitating a shift toward the "broadening out" trade. While mega-cap technology stocks have dominated, small and mid-cap (SMID) equities now present compelling value, especially within regional banking where consolidation and regional economic growth drive performance. AI remains a critical catalyst, yet the sustainability of current hyperscaler capital expenditure levels is under scrutiny, suggesting a potential normalization in the second half of the year. Software companies, previously punished by AI-related fears, are beginning to show signs of stabilization, offering opportunities for patient investors as valuations decouple from the "SaaS-pocalypse" narrative. Market participants should anticipate increased volatility as the labor market remains resilient and the broader index composition continues to evolve beyond the top-heavy concentration of the Magnificent Seven.