Faster market rotations may be the new normal

(Runtime: 6:00. Read the audio transcript.)

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As global equity leadership shifts and reverses in rapid succession, investors should focus less on predicting winners and more on building portfolios that can adapt, says Katherine Owen of Mackenzie Investments.

Speaking on the Soundbites podcast, Owen said a long-anticipated broadening in global equities is underway — but it’s proving far more fragile and complex than a simple rotation away from U.S. mega-cap dominance.

She said 2026 has been defined by rapid shifts in sentiment, starting with a broadening away from the Magnificent Seven and U.S. equities. That reversed, however, at the start of the U.S.-Iran war.

“You saw, basically, a retracement in performance in international markets, and then a return to flows in some of the more defensive sectors in the U.S.,” she said.

Now, markets are beginning to look past the war, with growing optimism around economic acceleration in the U.S. and international markets. And there is renewed excitement about the AI trade, leading to a revitalization in the Mag Seven.

“So, the situation is very fluid,” she said. “In terms of how durable the shift is, I’m not sure but I think this is the new normal. I think the market environment that we’ve seen over the last few years is faster, much more reactive, much more willing to look forward than worry about what’s going on at the present.”

A faster-moving market means investors have to be more nimble, creating “all-weather” portfolios that will be resilient in changing economic cycles.

In terms of sectors, Owen is being cautious about consumer staples, which may be reaching the limits of pricing power as consumer budgets are increasingly stretched.

“When you think about elasticity of demand, before you could raise prices but you wouldn’t really impact volumes,” she said. “Today you’re raising prices but you’re seeing an impact to volume or a trade down to lower-priced goods or even a trade down to private label. Now there is an impact of raising prices.”

Regionally, she sees opportunities in Japan which has spent decades fighting deflation and low growth. Recent policy decisions are starting to have a stimulative effect on the economy, accelerating GDP and inflation and leading to rising interest rates.

She said it is a positive backdrop for banks like Mitsubishi UFJ Financial Group (MUFG), which has a reputation for being shareholder friendly and offering higher dividends.

“We like that bank because they are not only benefiting from an improving macro environment in Japan, but also making company-specific actions that will improve the overall profitability of the bank,” she said.

Other global names she likes include Schneider Electric and TSMC (Taiwan Semiconductor Manufacturing Co.) — both of which are critically involved in the development and buildout of AI.

Above all, she looks for high-quality companies that can withstand volatility.

“The market today is extremely volatile. It’s been like a roller coaster,” she said. “But the worst thing you can do is panic sell at the bottom and then buy back at the top. That is the number one way that investors can destroy their return profile over time or even lose money permanently.”