A broader market beckons in 2026

By Darius McDermott on 13 January 2026 in Ideas & insights

Market leadership diversified in 2025. Although the technology sector remained strong, it had to share the limelight with areas such as defence, financials and precious metals. With technology valuations still ambitious, diversity may be a feature of 2026, as investors look to broaden their exposure in the face of the extraordinary concentration of global stock markets.

In its 2026 outlook, T. Rowe Price says there are plenty of “good ponds” within equity markets today, where growth and pricing power remain strong: “These are no longer confined to US technology. They now encompass a wider range of sectors and regions, reflecting a more globally distributed opportunity set.”

There are a number of reasons why the opportunity set is expanding beyond technology. In the US, the enactment of the One Big Beautiful Bill Act in July is expected to add approximately $200–300 billion in stimulus. T. Rowe Price says: “This fiscal thrust should provide a frontloaded boost to economic activity and corporate earnings. The Bill’s emphasis on physical infrastructure, energy grids, roads, bridges, data centres, and industrial capacity should drive renewed breadth across sectors, notably industrials, materials, and energy.”

So, where’s value to be found in 2026?

Valuations are another factor. After another strong year in global stock markets, there are fewer glaring opportunities. Looking at price to earnings (P/E) ratios, only a handful of sectors are considered “fair value” rather than “expensive” or “over-valued” compared with their longer-run averages. The three areas deemed to be fair value are real estate, healthcare and consumer staples.

The Shiller P/E, which adjusts for the earnings cycle, presents a slightly different picture. The technology sector, for example, is currently expensive not just because it has a high P/E, but because it is operating at peak earnings. The Shiller P/E for technology is 63.9, compared with 39.3 for the standard P/E. This is the widest level for any sector. In contrast, for healthcare, the two readings are similar; for consumer staples companies, the Shiller P/E is lower*.

Many fund managers are fishing in these cheaper areas. Consumer staples, for example, feature in a number of portfolios. Fidelity Global Dividend has over double the benchmark weighting in consumer staples, including companies such as Unilever**. Consumer stocks are also an area of interest for James Thomson, manager of the Rathbone Global Opportunities fund. He has been moving away from AI holdings such as Nvidia, with consumer discretionary companies now making up the largest weighting in his portfolio. This includes Essilor. He also holds Walmart and Costco***.

Industrials are another significant holding for the Fidelity Global Dividend fund, at 22% (versus a 10.5% index weight), through companies such as Vinci and Legrand**. Alex Cutler, manager of the Orbis Global Balanced fund is also a fan of this part of the market, he says:

“Data centres can’t connect to electricity grids without transformers from Siemens Energy and its competitors, who are less able to increase capacity because Silicon Valley has hoovered up the most talented engineers. Grid power has to come from somewhere and has to be reliable. That bodes well for gas producer Shell and gas transporters Kinder Morgan and Enbridge. And amid all this, nuclear power is having a renaissance. As nuclear reactor providers to navies, BWXT and Rolls Royce are highly competitive for small reactor projects.”

Sam Witherow, manager on the JPM Global Equity Income fund, also has an overweight in utilities, including The Southern Company, alongside financial services and energy. Its most underweight positions are in technology – semi & hardware, basic industries and property^.

Earnings diversification

Earnings are another consideration. Earnings have been a major driver of the outperformance of technology in the US, but other sectors are catching up. Superior earnings growth may no longer justify the superior multiples commanded by technology companies.

In the fourth quarter of 2025, around 20% of technology companies outpaced market expectations on earnings, but so did 10% of consumer discretionary and industrial companies, and 7% of consumer staples companies^^. On earnings growth for Q1 2026, information technology still leads the pack, but materials and financials are both set to deliver double digit earnings growth.

Ben Leyland, manager of the JOHCM Global Opportunities fund, says:

“We remain confident that the outlook for earnings growth, and by implication equity returns, outside the US tech sector is as good as it has been for many years, and this is far from being reflected in valuations.” He points to German fiscal stimulus as a catalyst for industrial growth in Europe and implications for consumer behaviour and corporate profitability from the normalisation of inflation and interest rates in Japan.

Global stock-market leadership is diversifying, bringing other sectors onto the radar of global fund managers. 2026 is likely to be the year when investors start to fish in the ‘good ponds’ of global equity markets beyond technology.

*Source: GuruFocus, Sector Valuation: Shiller P/E by Sectors

**Source: fund factsheet, 30 November 2025

***Source: fund quarterly update, September 2025

^Source: JPM, 31 October 2025

^^Source: FactSet Research, 9 January 2026