The Federal Reserve has officially shifted gears. By lowering interest rates in mid-December 2025, the Fed sent a decisive signal to the global markets. For the better part of the last year, the stock market narrative was dominated by hardware and semiconductors. Investors poured billions into the companies building the physical infrastructure of artificial intelligence (AI). However, as borrowing costs drop and the economic temperature begins to cool, the market is entering a new phase.
We are witnessing a sector rotation. This phenomenon occurs when large institutional investors, the smart money, move capital from one area of the market to another to adapt to changing economic conditions. The capital that fueled the hardware rally is now looking for new homes. Specifically, investors are targeting sectors that offer a combination of reasonable valuations, steady cash flow, and defensive stability.
