J.P. Morgan Asset Management’s Meera Pandit and Katie Korngiebel argue that 2026’s equity rotation is real but not necessarily a bearish signal for U.S. stocks: leadership is broadening from the Mag 7 toward quality, value, cyclicals, and parts of the AI supply chain, while earnings growth remains strong.
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This Insights Now episode focuses on the equity-market rotation happening in 2026. Meera Pandit introduces the discussion and Katie Korngiebel frames the shift as a set of connected rotations: away from concentrated Mag 7 leadership, back toward quality, and from growth toward value. They note that in 2023–24 the Mag 7 drove most index performance, but by the recording date every Mag 7 name is down and lagging the index. Quality has rebounded after a weak 2025 stretch, and value is outperforming growth by a double-digit margin year to date, helped by Fed easing bias, fiscal support, and still-solid economic momentum. The conversation then moves to small caps, where they are more cautious. Small caps benefit from easier rates and stronger growth, but the speakers argue the backdrop is not the start of a fresh cycle. …
The immediate setup favors quality, value, and AI supply-chain beneficiaries over the most crowded Mag 7 names. Small caps and software look more vulnerable if rates, growth, or AI sentiment wobble.
Over the next few months, the market likely stays broader than it was in 2023–24, with earnings breadth and policy support helping cyclicals and selected non-tech sectors. A reversal would require weaker growth, fewer Fed cuts, or evidence that AI spending is not translating into revenue.
The longer-run implication is a less concentrated U.S. equity regime in which earnings growth is still the main driver, but value accrues increasingly to businesses that monetize AI, own infrastructure, or benefit from non-U.S. cyclicality. The market appears to be moving from a narrow AI narrative to a more diversified profit cycle.
The equity market is experiencing multiple linked rotations: Mag 7 leadership is fading, quality is back in favor, and value is beating growth.
This is the core organizing framework of the discussion.
Every Magnificent 7 stock is underperforming the index in 2026 after dominating performance in 2023 and 2024.
They contrast earlier concentration with current underperformance.
Quality is outperforming again because investors are prioritizing balance sheets, profitability, and valuation.
They explicitly say quality is back due to these fundamentals.
Can you walk us through a bit what's going on there to start?
Katie explains that multiple rotations are happening together: away from Mag 7 concentration, back toward quality, and from growth to value, all tied to policy and cyclical factors.
What are you kind of telling our clients about that?
They are cautious on broad small caps because a sustained cycle and prolonged easing are uncertain; mid caps and small-cap value look more attractive.
What has been going on year-to-date in tech?
Software has been the main drag, partially due to AI angst and agentic coding advances, while hyperscalers are being judged on AI revenue and compute efficiency rather than just spending.
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