Beyond Big Tech: Investment Opportunities in 2026
From Small Caps to Gold and Emerging Markets, Analysts Highlight Undervalued Opportunities Amid Shifting Market Dynamics
Global investors are expected to actively pursue undervalued opportunities across financial markets in 2026, as mounting concerns over a potential artificial intelligence bubble prompt a strategic shift away from richly priced technology stocks, according to market analysts.
“Rising fears of an AI-driven valuation bubble are pushing investors to look beyond highly priced technology stocks and reassess overlooked segments of the market.”
U.S. equities experienced sharp volatility in 2025, sliding close to bear market territory in April following the introduction of sweeping tariffs by President Donald Trump, before staging a strong recovery to record highs later in the year. While analysts anticipate that market momentum will extend into 2026, they caution that returns will increasingly depend on selective asset allocation.
“This environment is particularly conducive to active investing,” strategists at the BlackRock Investment Institute noted.
“The dispersion of returns across asset classes is creating fertile ground for active investment strategies.”
Metal prices emerged as the standout performers in 2025, supported by a weaker U.S. dollar amid expectations of Federal Reserve interest rate cuts—developments that also boosted emerging market assets. Looking ahead, strategists identify several additional asset classes poised to attract investor interest.
Small-Cap Equities: Earnings Recovery Drives Renewed Appeal
After several years of underperformance, U.S. small-cap stocks are expected to regain prominence as corporate earnings improve and borrowing costs decline.
“The key shift heading into 2026 is the return of earnings growth among small-cap companies,” said Oren Shiran, Portfolio Manager at Lazard Asset Management.
“For the first time in years, earnings momentum is returning to U.S. small-cap stocks.”
Market participants currently anticipate two 25-basis-point interest rate cuts by the Federal Reserve in 2026, according to LSEG data. Given their higher debt exposure, small-cap firms tend to benefit disproportionately from easing financial conditions.
Jefferies equity strategist Steven DeSanctis projects the Russell 2000 index to reach 2,825 points by the end of 2026, representing an approximate 14% increase from 2025 levels.
“Lower interest rates could act as a powerful tailwind for highly rate-sensitive small-cap companies.”
Gold: Sustained Strength After a Historic Rally
Gold delivered its strongest annual performance in decades in 2025, marking its best year since the 1979 oil crisis. Major financial institutions, including J.P. Morgan and Bank of America, forecast gold prices could reach $5,000 per ounce in 2026.
“Gold’s resurgence reflects a broader shift toward hard assets amid monetary uncertainty and reserve diversification.”
While analysts at Wells Fargo Investment Institute expect favorable conditions to persist, they caution that gains may unfold at a more measured pace. Central bank buying is expected to remain a key source of support as policymakers continue to reduce reliance on dollar-denominated reserves.
Healthcare and Financials: Policy Tailwinds and Valuation Support
Healthcare is widely viewed as a potential outperformer, driven by favorable policy developments and expanding demand for innovative treatments. Morgan Stanley highlighted the growing penetration of weight-loss drugs as a major growth catalyst.
“Healthcare innovation is increasingly shaping sector performance rather than traditional cost dynamics.”
Financial stocks—particularly banks—are also expected to perform strongly as mergers and acquisitions accelerate and loan growth rebounds. According to Morgan Stanley, the sector remains attractively valued, supported by deregulation trends and efficiency gains linked to artificial intelligence.
“Mid-cap banks offer some of the most compelling early-cycle opportunities in financial markets today.”
Currencies: Dollar Weakness Opens the Door for Alternatives
The U.S. dollar is widely expected to face renewed downward pressure in 2026 as the Federal Reserve cuts rates to support a cooling labor market. Political uncertainty, including the appointment of a new Fed chair, is also likely to contribute to currency volatility.
“A softer dollar environment could redefine global currency leadership in the coming cycle.”
A weaker dollar may increase the appeal of emerging market currencies such as China’s yuan and Brazil’s real, while commodity-linked currencies—including the Australian and New Zealand dollars—could benefit from an improving global growth outlook.
Emerging Markets: Stability and Valuations Attract Capital
Emerging markets are expected to continue attracting capital inflows, supported by improved macroeconomic stability and attractive valuations.
“Emerging markets have become less volatile than developed markets,” strategists at BofA Global Research said.
“Macro stability in emerging markets is stronger today than at any point in recent decades.”
Nonetheless, analysts warn that political developments—particularly elections in countries such as Brazil and Colombia—could pose near-term risks.
High-Yield and Corporate Bonds: Deal Activity Fuels Demand
High-yield and corporate bond markets are poised for another active year as demand rises for acquisition financing and capital investment, particularly among technology firms expanding data infrastructure.
High-yield issuance reached $325 billion by mid-December 2025, the strongest annual performance since 2021, according to PitchBook data.
“Investor appetite has proven resilient, even amid elevated bond issuance levels.”
Portfolio managers at Janus Henderson maintained a constructive outlook, citing strong absorption of supply.
Event Contracts: A Rapidly Expanding Alternative Asset Class
Event contracts—allowing investors to trade outcomes linked to politics, sports, and financial events—are emerging as one of the fastest-growing alternative asset classes.
“We are in the early stages of a supercycle for this emerging asset class,” said Robinhood CEO Vlad Tenev.
“Prediction markets are evolving from niche products into a mainstream investment theme.”
Analysts estimate that the sector could generate five times its current revenue by 2030 as institutional participation increases, although regulatory scrutiny continues to intensify.
Reporting by Joel Jose, Kanchana Chakravarty, Niket Nishant and Siddarth S in Bengaluru; Editing by Vidya Ranganathan and Krishna Chandra Eluri
Source: REUTERS
