Stock markets (^DJI, ^IXIC, ^GSPC) are trending upward ahead of Big Tech earnings, despite an ongoing market rotation. Thomas Hayes, Great Hill Capital chairman and managing member shares his market outlook on Catalysts.

Hayes explains there's "a fundamental underpinning" to his belief that the remaining 493 S&P 500 companies will begin to outperform the Magnificent 7. He points to earnings composition as the primary factor, highlighting a shift in earnings growth dynamics. Hayes notes that fourth quarter forecasts project 19% growth for the 493 companies compared to 17% for the Magnificent 7, indicating "decelerating earnings growth for the Magnificent Seven, accelerating earnings growth for the unmagnificent 493."

With markets hoping for a Federal Reserve rate cut, Hayes identifies four areas set to outperform: small caps, cyclicals, international stocks, and REITs. He advises investors, "When everyone is crowded to one side of the boat, it makes sense to start to ease into the other opportunities in the market."

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This post was written by Angel Smith