Barron's Streetwise The Anything-But-AI Rally. Plus, Social Security’s Countdown.
Feb 27, 2026
Brett Ryan, an economist at Deutsche Bank, explains the U.S. fiscal outlook and looming Social Security timing. He discusses tariffs, deficit drivers, demographic pressures, and the 2032 trust fund deadline. He also covers how CBO assumptions and Fed credibility shape borrowing costs and macro risks.
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Rapid Great Rotation Away From AI Leaders
- Markets rotated away from AI growth leaders into value, small caps, dividends, and overseas stocks in a concentrated, rapid move dubbed a "great rotation."
- Vanguard Value, SCHD dividends, small-cap ETFs, and VXUS international ETF all outperformed the S&P YTD during this shift.
Avoid Chasing Rotation Rallys
- Don't chase every sector rally; validate company fundamentals after price jumps before buying into a rotation.
- Example: Molson Coors rose then fell after weak guidance, showing timing risk in chasing staples rallies.
MAG7 Valuations Reflect Real Growth
- The MAG7 premium narrowed from ~38x to ~26x earnings while still projecting ~23% earnings growth versus ~13% for the rest of the S&P.
- That suggests higher valuation partly reflects materially stronger near-term growth expectations.