The big things you need to know:

1. First, we are upgrading S&P 500 Health Care to overweight from market weight.
2. Second, we are upgrading S&P 500 Communication Services to overweight from market weight.
3. Third, our other S&P 500 recommendations are unchanged. We remain overweight Financials and Materials, underweight Consumer Discretionary, and market weight all other sectors. Among our market weights, we have a preference for sectors that look attractively valued on our quant analysis (Consumer Staples, Energy, REITs) over those that look expensive (Utilities, Tech, and Industrials) which have been the early beneficiaries of the AI trade.
4. We also close with a quick thought on the biggest macro takeaways from our 4Q25 global analyst outlook survey.

The big things you need to know:

• First, several things that US equity markets have been linked to (breadth, bitcoin, private market fears, Fed cut expectations, consumer sentiment) have gotten better in recent updates.
• Second, a few signals from our year-ahead outlook analysis have shifted over the past week.
• Third, there have been a few interesting twists and turns in positioning since Thanksgiving week in terms of sectors and factors.

The big things you need to know:

• First, our 12-month-forward price target for the S&P 500 is 7,750, approximately the median and average of five different models that we use, which focus on sentiment, valuation, the appeal of stocks relative to bonds, the economic outlook, and monetary policy.
• Second, some of the key headwinds / downside risks and tailwinds / upside risks we’re monitoring include shifts in expectations for the economic backdrop, renewed interest in geographical diversification, and the midterm elections.
• Third, tactically (near term) we are leaning into the rotation in leadership within the US equity market from Growth to Value and the mega cap Growth trade to the rest of the market, but caution that a shift in earnings dynamics is still needed for this transition to have significant duration.
• Fourth, we have gotten more comfortable adding to Small Caps but see risk that recent outperformance ends up being short-lived once again unless the underlying economic backdrop / overall economic conditions heat up significantly.