Big Tech’s Allure Fades as Wall Street Bets on Main Street Stock Rebound in ’26

It’s the last full trading week of the year on Wall Street, with a deluge of pent-up 2025 data heading our way, but all investors seem to care about is staking out positions for the new year.

Traders continued rotating out of the artificial intelligence trade that has powered this year’s market rally on Monday. Some see it as a new “run-it-hot” bet on Main Street. 

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The S&P 500 is up 15.9% this year, and the market’s rally is now over three years old. There is broad belief that it will continue through 2026, but the path forward looks a little different, according to Wall Street forecasts. Still important will be the tech megacaps, with enough data center announcements to fill the footnotes of a long-lost corporate dystopia novel by David Foster Wallace. “Bubble or not, history shows that rallies can last for quite some time (3-5 years in the dot-com/housing boom), so we see more to come and recommend a broadening of the AI trade,” HSBC analysts wrote last month.

But equity gains will not be limited to tech as tax and interest-rate cuts lift corporate earnings for an array of mid- and small-cap stocks. Trading activity already reflects rotations in line with this view. On Monday, Oracle, down 2.6%, and Broadcom, down 5.6%, were hammered again; they’ve given up 16% and 15.2% of their value, respectively, in the past five trading days, while the S&P 500 has ticked down a mere 0.4%. Deutsche Bank analysts observed that, while the S&P 500 is below its October record high, “the average stock in the S&P 500 is higher, as are small caps, while mega-cap growth and tech stocks … are down.” As banks have issued bullish stock market projections for 2026, they’ve highlighted how growth could come from sectors of the economy outside tech:

• Bank of America forecasts S&P 500 earnings will grow 14% next year, and sees the index reaching 7,100 (it closed at 6,817 on Monday). JPMorgan Chase pegs earnings growth at 13% to 15% and has a more bullish target of 7,500. Profit hopes have been boosted by a rosier outlook for the US economy, which the Federal Reserve expects to grow 2.3% in 2026, up from its 1.8% forecast in September. 
• Morgan Stanley, with an even more ambitious 7,800 S&P 500 forecast, sees a “rolling recovery” in which small-cap equities outperform large caps. Deutsche Bank, the most bullish major bank with an 8,000 forecast, expects both corporate earnings and the AI trade to make strong gains.

Letters to a Contrarian: Bank of America Chief Investment Strategist Michael Hartnett called commodities “the best ‘run-it-hot’” trade of 2026 earlier this month, noting metals’ increasing importance in the AI boom. For the more courageous, he deemed oil and energy stocks, which have long underperformed, “the best ‘run-it-hot’ contrarian trade” in part because they, too, feed booming AI demand.