The tech sector (XLK) has been experiencing a market rotation with investors pivoting into small caps (^RUT). State Street Global Advisors US SPDR Business chief investment strategist Michael Arone joins Morning Brief to discuss his market outlook.

Arone identifies "a trifecta of positive news" that triggered the rotation within the tech sector: cooler-than-expected inflation reports, Federal Reserve Chair Powell hinting toward interest rate cuts, and Powell's acknowledgment that he didn't see inflation reaching 2%.

However, this earnings season has shown that "good is not good enough" for the Magnificent Seven tech stocks. Despite top and bottom line beats, any weakness in AI or cloud businesses has been "a hindrance to the stock," suggesting that the rotation "has some legs."

Amid this shift, Arone highlights financials as an attractive sector, noting increased M&A activity and improving earnings. Arone also points to the insurance industry, saying it's "an area where they have pricing power."

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This post was written by Angel Smith