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Market Shifts: Investors Move Beyond Tech Giants

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  Published in Stocks and Investing on Thursday, January 15th 2026 at 6:53 GMT by The Globe and Mail

Thursday, January 15th, 2026 - For years, the U.S. stock market has been synonymous with the dominance of technology giants. However, a significant shift is underway, with investors increasingly seeking opportunities beyond the familiar realm of big tech, signaling a potential realignment of market leadership. Throughout 2024 and continuing into early 2026, value stocks and smaller companies have demonstrably outperformed, prompting analysts to reassess the future trajectory of the market.

The S&P 500's impressive 17% gain year-to-date highlights the overall market strength. While the tech sector remains a significant contributor, its influence has noticeably diminished. This isn't simply a correction; it represents a broader market rotation - a reallocation of investment capital toward previously undervalued or overlooked segments.

The Rise of Value and Small-Cap Stocks

The recent outperformance of value stocks - companies considered undervalued relative to their fundamentals - is particularly noteworthy. For a considerable portion of 2024, value outperformed growth stocks, reversing a long-standing trend where high-growth potential overshadowed intrinsic value. This shift suggests investors are prioritizing profitability and dividend yields over purely speculative future earnings.

Simultaneously, small-cap stocks, often seen as barometers of economic health, have experienced a resurgence in popularity. These smaller companies are inherently more sensitive to economic fluctuations, and their current strong performance reflects a broader sense of economic resilience and optimism. Investors appear to believe there's ample room for smaller companies to thrive within the current economic environment, benefitting from a strengthening economy and potentially innovative business models.

"There's a sense that the economy is still resilient, and that there's room for smaller companies to grow," observes Brian Belski, chief investment strategist at BMO Capital Markets, a sentiment echoed by many analysts monitoring market trends.

Tech Sector Headwinds and Investor Reassessment

While the technology sector remains a critical engine of the U.S. economy, concerns are mounting that its leadership position may be waning. Rising interest rates - impacting borrowing costs and potentially slowing growth - and heightened regulatory scrutiny are contributing to this pressure. Several analysts have expressed concerns that the era of unchecked tech sector expansion may be drawing to a close.

Nancy Tengler, chief investment officer at Tengler Wealth Management, succinctly summarizes this view: "The tech sector is facing some headwinds. Investors are re-evaluating their exposure to the sector." This reassessment is leading to a more cautious approach and a willingness to explore alternative investment opportunities.

Portfolio Strategy Implications and the Importance of Diversification

The shift away from tech stocks has important implications for portfolio construction. Investors who have heavily concentrated their portfolios in technology may be well-advised to consider diversifying their holdings. Kevin Reynolds, chief investment officer at Harvest Portfolios, emphasizes a core principle of sound investing: "It's important to have a balanced portfolio. You don't want to put all your eggs in one basket."

Diversification reduces risk by spreading investments across different asset classes and sectors, mitigating the impact of any single area underperforming.

A Cautious Outlook: Sustainability and Potential Reversals

Despite the compelling evidence of a market rotation, analysts caution against declaring the tech sector's dominance definitively over. The sector could still experience a rebound if economic conditions improve or if regulatory concerns abate. The overall market landscape remains dynamic, and unforeseen events can quickly alter investor sentiment.

"It's still early days," warns Tengler. "We need to see if this trend persists." The continued strength of value and small-cap stocks will depend on sustained economic growth and a favorable regulatory environment. While the signs point to a broadening of market leadership, vigilance and adaptability remain crucial for investors navigating this evolving landscape.

Looking Ahead: Opportunities and Risks

The shift in market leadership presents both opportunities and risks. Investors who recognize and capitalize on this rotation could potentially benefit from the outperformance of value and small-cap stocks. However, those who remain overly concentrated in technology risk missing out on these gains and exposing themselves to unnecessary downside risk should the tech sector falter.