US investors shift from tech to industrial, healthcare, and small-cap stocks as the S&P 500 rally broadens in 2026
US investors are increasingly betting that the stock market rally, long driven by technology giants, will broaden to include industrial, healthcare, and small-cap companies, creating opportunities for these sectors to take market leadership, according to Reuters.
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Shares of tech leaders such as Nvidia, Alphabet, and Broadcom have underpinned a bull run in which the S&P 500 has risen over 90 per cent since its market bottom more than three years ago.
However, high valuations and uncertainty around the AI theme have prompted investors to explore opportunities in other parts of the market.
“Conditions are likely in place for broader leadership to emerge, especially given elevated valuations in tech,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.
“There are pockets of value to be found beyond technology.”
Since the end of October, industrial, healthcare, and small-cap stocks have outperformed the broader S&P 500, while tech stocks have shown some declines, highlighting a potential rotation in the market.
Earnings reports for the fourth quarter of 2025 and projections for 2026 will be critical in determining whether this broadening is sustainable. Analysts expect solid profit growth across multiple sectors.
“Strategists have been predicting better earnings for a long time, but I really think it has legs this year,” said Nanette Abuhoff Jacobson, global investment strategist at Hartford Funds.
“We are beginning to see AI benefits filtering through to a broader collection of sectors.”
While the “Magnificent Seven” tech companies including Nvidia, Alp Appleare projected to grow earnings by 23.5 per cent in 2026, the rest of the S&P 500 is expected to see a 13 per cent rise, according to LSEG.
Michael Arone, chief investment strategist at State Street Investment Management, noted that if this earnings gap narrows, leadership in the market could broaden further.
The equal-weight S&P 500 index, which tracks the average performance of all constituent stocks, has gained over 5 per cent since October, outperforming the standard tech-heavy S&P 500.
“Investors are increasingly looking at sectors beyond technology, seeking value and growth across a wider market spectrum,” said Keith Lerner, chief investment officer at Truist Advisory Services.
Despite the rotation, technology is expected to remain a major force, accounting for roughly one-third of the S&P 500 and projected to post earnings growth of more than 30 per cent in 2026, compared with 15.5 per cent for the index overall.
Jack Janasiewicz, portfolio manager at Natixis Investment Managers, advised a balanced approach: “Tech still works; you don’t want to chase it, but you also don’t want to be underweight. At the same time, there is a wider range of opportunities in value-oriented sectors.”
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Analysts say that by broadening across multiple sectors, the US stock market rally could sustain itself in 2026 without relying solely on tech megacaps.
