US Market Rally Set to Broaden Beyond Tech as Investors Rotate Into New Sectors

The long-running US stock market rally, powered largely by technology giants, may be entering a new phase as investors increasingly turn their attention to other sectors. Market participants are now betting that industrial, healthcare, and small-cap stocks could emerge as new drivers of growth, according to a Reuters report.

Technology heavyweights such as Nvidia, Alphabet, and Broadcom have anchored a bull market that has pushed the S&P 500 up more than 90 per cent since its low over three years ago. However, stretched valuations and growing uncertainty around the artificial intelligence theme that fuelled the surge are prompting investors to search for value beyond tech. Analysts say the conditions are now in place for leadership to broaden across the market.

Recent performance data supports this shift. Since late October, industrial, healthcare, and small-cap stocks have outperformed the broader S&P 500, while technology shares have recorded modest declines. This divergence suggests a potential rotation as investors rebalance portfolios toward sectors with more attractive valuations and earnings potential.

Earnings results for the fourth quarter of 2025 and outlooks for 2026 are expected to play a decisive role in determining whether the broader rally can be sustained. Analysts anticipate solid profit growth across multiple sectors, with benefits from artificial intelligence beginning to spread beyond technology companies into wider areas of the economy.

While technology is expected to remain a dominant force—accounting for about one-third of the S&P 500 and forecast to post earnings growth above 30 per cent in 2026—strategists advise a balanced approach. With the rest of the index projected to close the earnings gap, analysts believe a more diversified rally could help support the US stock market through 2026, reducing its reliance on a handful of tech megacaps.

source: punch