Tech Rotation to Follow Santa Claus Rally, AAPL 2026 "Favorite"

Market Outlook - The market is expected to experience a "Santa rally" as many money managers are likely to engage in catch-up trades and window dressing due to underperformance against their indexes [2][3] - A risk-on environment is emerging, particularly in the AI sector, which has seen significant price corrections but is now attracting renewed interest [3][4] Sector Rotation - The company anticipates a rotation away from technology stocks, which are expected to be overbought and crowded in early 2026, towards economically sensitive sectors such as small caps and financials [6][8][10] - Small caps are showing signs of breaking out after a prolonged period of underperformance, with a year-over-year growth of approximately 20% expected, making them a more favorable investment compared to tech [12][15] Investment Strategy - The focus will shift to sectors that benefit from a more accommodative Federal Reserve and an accelerating GDP, particularly financials and industrials [10][11] - The company plans to maintain a position in technology but will reduce exposure significantly in the first quarter of 2026, as the risk-reward profile for tech is deemed poor [6][8] Specific Stock Picks - Apple is highlighted as a key investment for 2026 due to low market expectations and increasing sales in China, positioning it as a defensive tech play [17][19] - The US home construction ETF (ITB) is identified as a contrarian play, with potential bullish catalysts from improved mortgage rates and supportive government policies aimed at reviving the housing market [20][21][23]