Next week, starting January 27th, we start to hear from major tech companies: IBM (IBM – Jan 28th AMC), Microsoft (MSFT, Jan 28th AMC), Tesla (TSLA, Jan 28th AMC), and Apple (AAPL, Jan 29th, AMC). Amazon (AMZN) was slated to release earnings Thursday, January 29th, but that now looks to be pushed back to February 5th.
For next week, my two favorites will be Boeing (BA, Jan 27th, BMO), and IBM Wednesday night, which will likely be overshadowed by Microsoft and Tesla.
(AMC is “after market close” and BMO is “before market opens” on the respective dates.)
Boeing’s all-time high was $446 from March, 2019 and the stock today is still down 44% from that all-time-high. A separate earnings preview will be prepared for readers.
The article written last weekend, on the trend in tech earnings, was a lead into the tech sector’s earnings this coming week and how “momentum” investing – at least as it was learned in the late 1990’s – sometimes acts as a vacuum, and siphons capital from other sectors, often for long periods of time.
In the late 1990’s, the market volatility was also much higher where the SP 500 and Nasdaq saw sharp corrections starting in 1997, with the Thai Baht and Malaysian Ringgit devaluations in July ’97, which led to a sharp correction in Q3 and early Q4 ’97, to the LongTerm Capital Management drawdown in 1998, which was frightening at the time since no one knew what was happening.
Because the late 1990’s rally was very “binary” in nature, when the large-cap growth and tech began to correct, you’d see capital flow to all of the out-of-favor sectors that were doing nothing, like small and mid-cap, commodities, energy, utilities, etc., and these stocks and sectors would bounce for a few weeks / months, and then once the tech / large-cap growth rally would resume, those safer sectors would fade, and return to dormancy.
In other words, investors saw a lot of “false tells” (rallies) from the laggards, ultimately to fade once the momentum trade re-asserted itself.
This article from last weekend talks a little about the rotation being seen this year in the first 3 weeks, but we still have to wait and see what the technology / AI stocks reports since good numbers, and above-expectations guidance could re-ignite the Mag-7, Mag-10 crowd.
2023 and 2024’s 25% returns on the SP 500 were all “AI” or momentum driven. 2025’s +17.88% return on the SP 500 was the first year we saw international participate with robust returns, as well as long out-of-favor gold, and silver and – even late in the year – aluminum, copper, platinum, etc.
Is 2026, will investors see, “out with momentum, and in with value, etc. ?”
One major difference between the late 1990’s and the internet frenzy and today’s AI market, is that market breadth has been remarkably solid through the 2020’s while in the late 1990’s, the breadth data was not encouraging, even with five years in a row of +25% annual SP 500 returns.
My guess is any rotation will likely happen on a more subdued scale than 1999 and then the early 2000’s as could be happening now.
Of the 11 SP 500 sectors in the SP 500, per the LSEG data, technology is expected to see +31% EPS growth in 2026. Will readers be surprised to know that what the sector with the 2nd highest expected EPS growth in 2026 is basic materials ? Yes, basic materials is expecting 21% EPS growth in 2026. Basic materials is a whopping 2% of the SP 500’s total market cap weight.
After updating the JPMorgan, and Citigroup spreadsheets (still working on Bank of America), both JPM and C reported decent metrics, and most importantly the forward EPS and revenue estimates from ’26 through ’28 were revised higher, but the stocks trade very poorly. More needs to be written on this.
Finally, in last week’s tech earnings post linked above, I wondered how much of the “tech” sector was semiconductors and semi equipment. I threw an email out to LSEG and Tajinder Dhillon, the earnings guru at LSEG told me that semiconductors and capital equipment combine for 38.2% of the tech sector. Intel (INTC) reported last night and had a very tough day today, so that will be a drag on the semiconductor sector.
38.2% is a big chunk and the semiconductor (memory) stocks like Micron (MU) and Sandisk (SNDK) are white-hot right now. SNDK was up 112% YTD as of last night’s close, while Micron was up 39% YTD.
Like the warning on a pack of cigarettes, the semi sector, particularly commodity memory stocks, require a warning to readers: these are very tough stocks to trade and to try to pick highs and lows. The bottom can come out of these stocks in a hurry, and semi’s can and have the ability to destroy capital for very long periods of time. This is a capital-intensive sector that is very cyclical.
Between gold, silver and the memory companies, we’re back in late 1990’s momentum mode.
Summary / conclusion: This blog’s biggest additions to client portfolios YTD are small-cap (primarily IWM) and Emerging Markets ex-China (EMXC) which has been a non-correlated long for a few years, but now the weight is being lifted.
This blog is still adding to international for clients, even Japan via the EWJ. (More on this later.)
There are other opportunities too like the energy sector, and the afore-mentioned basic materials. It was interesting to read today looking at LSEG’s “This Week in Earnings” and the Earnings Scorecard, that the energy sector is still seeing negative revisions, despite the sector finally showing some relative strength.
None of this is a recommendation or advice but only an opinion. Past performance is no guarantee of future results. Readers should gauge their own comfort with portfolio volatility and act accordingly. Writing about the market helps me flush out the thought process and either cements certain views, or results in more time being needed to form a solid opinion.
Thanks for reading.