Allspring Sees Big Opportunities for Small- and Mid-cap Equities in ’26

Aim small, miss small.

That’s the guidance one asset manager is offering advisors as 2026 looms ever closer. The S&P SmallCap 600 and MidCap 400 have lagged their large-cap brother, the S&P 500, for the past five years, but major opportunities may lie ahead for the little guys, according to Allspring’s 2026 outlook. For years, the market and the broader economy have been driven by a handful of Big Tech giants riding the AI wave. Allspring expects a rebalancing now, with smaller companies and sector-specific players using the technology beginning to capture more investor attention. Advisors who have stayed overweight in large-caps may need to reconsider their allocations.

“There’s so much money in the large caps right now, and the S&P 500 is doing great, so there hasn’t been much urgency to pivot away,” said Bryant Vancronkhite, senior portfolio manager at Allspring. “But as we move to the next phase of AI, I think we’ll start to see the S&P become easier to beat by small and mids.”

What’s Your Size?

AI and tech will still be the name of the game in 2026. “It’s hard to avoid it,” Vancronkhite told Advisor Upside. “Any manager underweight in tech could be in for a world of challenges.” However, it won’t only be chipmakers and large-language-model developers reaping the rewards. As AI becomes more integrated into every facet of business and daily life, sectors beyond Big Tech should benefit, too.

• Allspring highlighted industrials and materials as two of the top sectors to watch next year for their roles in building data centers. Specifically, Allspring pointed to companies like cement manufacturer Amrize and Gates Corporation, which makes belts and related components for heavy machinery.
• Healthcare, meanwhile, has faced plenty of headwinds: rising costs, policy uncertainty, and a post-pandemic environment with less demand for COVID vaccines. But those pressures have also driven valuations down, and AI is advancing medicine at a rapid pace.

“It’s a dark horse,” Vancronkhite said. “We can now use AI to get screening that’s more accurate in diagnosing issues and figuring out which medicine is going to work best on your body versus my body. Ultimately, you want to be exposed to companies that are going to participate in that kind of personalized medicine.”