The Rotation Nobody Wants to Talk About

Pull up the YTD thematic heat map and one thing becomes clear: this is not a speculative growth market. It’s a rotation market. And rotations tell stories.

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What’s Getting Hit

The market is punishing quantum computing, SaaS/software, VR/AR, fintech, crypto/blockchain, social media, and cloud applications.

These are high-duration, high-multiple, liquidity-sensitive areas.

When this entire cluster trades red together, it usually means liquidity is tightening or being repriced.

This is where narratives get expensive.
This is where “future growth” gets discounted harder.

That’s not early bull behavior.

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What’s Leading

Now look at what’s green:

• Energy (oil, LNG, refiners, services)
• Commodities (gold, silver, uranium, fertilizers)
• Industrials
• Transports
• Defense
• Select semiconductors (memory and foundries)

This is hard-asset positioning.

This is cash flow.
This is supply constraints.
This is geopolitical premium.
This is inflation hedge behavior.

This is not story-driven.
This is tangible-demand driven.

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What It Means

When markets shift from “buy innovation at any price” to “own things that make money today,” that’s a regime shift in tone.

It doesn’t automatically mean bear market — but it does mean leadership is changing.

And leadership changes matter.

Interest rates are still too high to justify paying extreme premiums for future growth.

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Is This Late-Cycle?

It has late-cycle characteristics.

Late-cycle markets typically reward:

• Cash flow
• Commodities
• Defense

while punishing:

• High-multiple growth
• Narrow index leadership

But before declaring anything dramatic, we need confirmation from breadth and credit.

For now, this is rotation — not collapse.

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What To Do

Over time, even the under-owned “value” names get crowded.

Cheap turns expensive relative to their own history and earnings.

Rotation doesn’t have a fixed duration — capital flows until positioning becomes stretched.

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What Changes the Equation?

Interest rates.

If the Fed cuts and we see the 10-year Treasury fall well below 4%, that shifts the landscape.

Lower long-term yields reduce competition between bonds and equities.
The discount rate on future earnings drops.

That’s when growth can re-expand and justify premium valuations again.

Until then, capital will likely favor cash flow and hard assets over duration — assuming corporate profits and earnings hold current forecasts, which is not guaranteed.

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Bottom Line

This isn’t a market to blindly buy narratives.

It’s a market to respect regime.

Right now, regime favors:

• Energy
• Commodities
• Industrials
• Defense

while duration continues to be repriced.

Adapt accordingly.

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