Bloomberg Surveillance Rotation Trade & Fed Expectations
Jan 23, 2026
Monica Guerra, Morgan Stanley policy head, outlines defense-focused fiscal shifts under a second term. Kay Herr, JPMorgan CIO for fixed income, breaks down bond resilience, credit preferences and gold demand. Joe Quinlan, Merrill market strategist, covers sector rotation, retail buying and the bull market’s potential to run longer. Short, punchy takes on markets, policy and where investors are moving next.
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Broaden From Mega Caps To Cyclicals
- Rotate exposure from concentrated mega-cap winners toward small caps and cyclicals like financials, materials, and industrials.
- Expect these 'old economy' sectors to benefit from technology adoption and to surprise positively.
Bull Market Potential Through 2027
- The current bull market still has runway; average bull markets last ~5.5 years and we're under three and a half years in.
- Strong U.S. nominal GDP and faster growth than China underpin earnings and extend the cycle into 2027–28, per Quinlan.
Allocate Alternatives Gradually
- Consider private credit and private equity but increase allocations slowly; many clients target 10%–15% rather than 20%+.
- Account for tax, paperwork, liquidity tranches, and require a 'show me' track record before scaling allocation.