Expect broadening of the market rally and rotation next year, says JPMorgan’s Elyse Ausenbaugh

I mean if you're telling me that all sectors are going to have you know really stellar earnings growth then where do I not want to be. Well I'm not saying really stelling earning stellar earnings growth but just positive earnings growth for the first time in a long time. And I think if we were calling for an everything rally we would be pounding the table on maybe the small and mid cap complex. But for now we're somewhat agnostic between that part of the market and the larger cap part of the market. We do still think you know that magnificent seven cohort can do a lot of the heavy lifting and likely post stronger growth numbers than the remaining four hundred and ninety three. But I think a broadening of the rally and some degree of rotation should be expected in the year ahead. Samir how do you see it. Yeah I mean look I think you've got to kind of continue with the with the hot hands right. I mean we like com services. That's probably the most reasonably priced of the three growth areas. We recently upgraded consumer discretionary. That's where you've got your kind of EV players and e-commerce players that you've got to have a full waiting there. I think you have to have a full waiting technology. Right. That's kind of the epicenter where all the spending is happening. And then I think there's other spots too. Right. We like energy. Right. If you're going to have all this AI power generation it's going to be power at least in the short term probably by natural gas. Right. So energy has a much cleaner story than it has in recent years. We like industrials. We like financials. Both of those have to do with kind of the financing of AI and just the economy more broadly along with just building out those data centers that electrification. And so you know again I think there's a lot of different things that are working. Probably the only thing we would fade would be emerging market equities and defensives within the U.S. because again I think there's a lot of growth in other places. Are you are you expecting that the run we're seeing late year in mega cap is going to have a January effect once the calendar turns. We start thinking about some tax selling and things of the like. You know I've definitely heard investors talk a little bit about waiting until the New Year to take gains. But I think the way you want to go into the next year is a lot of people are waiting for that type of opportunity. So you go in with those full waiting. And I think honestly if there is a pullback you probably lean into that to add some of these areas. Because again I think pullbacks will be very short and shallow especially in the first half of next year when all this positivity kind of plays itself out. That what you think at least that you're going to get. You know if any pullback is just going to be bought because there's all this optimism about what a new administration is going to mean deregulation tax cuts higher growth more investment in the U.S. all the things that we hear about almost every day now. It certainly seems to be the case at least on the equity side. But we're looking across asset classes for opportunities as well. You know in core fixed income it's probably going to be carry like returns in the year ahead. But especially given how hard the equity market has rallied this year last year we also want to look for other ways to renew portfolio resilience and make sure we're kind of like fleshing out the full portfolio. Would we be foolish to think that we could have another banner year in stocks because we've had two in a row. It's happened. The problem is after you've had three years in a row of really strong returns what has typically happened is very poor returns in the following years. So if we get another year of 20 percent plus returns and it's mostly driven by multiple expansion as it was this year you do run the risk that forward returns would drop precipitously. And so we do have to be aware that things like leverage are picking up a lot in this market. And this is one thing that could keep people from being able to buy the dip. FINRA margin loan debt is up 45 percent year to date. You're seeing leverage ETF buying options buying all suggesting that people are starting to take on a lot more risk. So down markets are not as easily digested.