Global investors shift focus to undervalued opportunities beyond Big Tech for 2026
Global investors are shifting focus to undervalued opportunities beyond expensive tech stocks in 2026, with analysts highlighting small-cap stocks poised for 14% gains as Fed rate cuts benefit debt-heavy companies. Gold maintains strong momentum with major banks targeting $5,000 per ounce, while healthcare and financial sectors emerge as outperformers. Currency markets expect dollar weakness to boost emerging market assets, and high-yield bonds show robust activity with $325 billion in issuance.
*this image is generated using AI for illustrative purposes only.
Global investors are expected to actively hunt for undervalued opportunities across financial markets in 2026, as rising concerns over an artificial intelligence-driven valuation bubble push traders to look beyond expensive technology stocks. While analysts expect the broader rally to extend into 2026, they caution that investors will need to be more selective as valuations in some segments appear stretched.
U.S. equities experienced sharp swings in 2025, tumbling close to bear-market territory in April after President Donald Trump announced sweeping tariffs, before staging a strong rebound to record highs later in the year. Metal prices were among the top-performing assets in 2025, supported by a weaker U.S. dollar and expectations of interest rate cuts by the Federal Reserve.
Small-Cap Stocks Positioned for Revival
After lagging larger peers for several years, U.S. small-cap stocks are poised for a potential revival as earnings prospects improve and borrowing costs decline. Market expectations point to two 25-basis-point rate cuts by the Federal Reserve in 2026, based on estimates compiled by LSEG. Since small-cap companies typically carry higher debt loads, they tend to benefit earlier from easing financial conditions.
| Metric | Target | Potential Gain |
|---|---|---|
| Russell 2000 Index Target (End-2026) | 2,825 points | Nearly 14% from 2025 levels |
| Expected Fed Rate Cuts | Two 25-basis-point cuts | Supporting borrowing cost reduction |
Jefferies expects the Russell 2000 index to rise to 2,825 points by the end of 2026, implying a gain of nearly 14% from 2025 levels.
Gold Maintains Strong Momentum
Gold's surge in 2025 marked its strongest annual performance since the 1979 oil crisis. Major banks are forecasting significant price appreciation for the precious metal in 2026.
| Institution | Price Target | Previous Year Price |
|---|---|---|
| JPMorgan & Bank of America | $5,000 per ounce | $4,314.12 (2025) |
While analysts at Wells Fargo Investment Institute expect supportive conditions to persist, they anticipate a slower pace of gains. Central-bank buying is expected to provide continued support, as many countries continue diversifying reserves away from dollar-denominated assets.
Healthcare and Financial Sectors Show Promise
Healthcare is emerging as a potential outperformer, aided by policy support and the expanding reach of weight-loss drugs, according to Morgan Stanley. Financial stocks, particularly banks, are expected to benefit from accelerating mergers and acquisitions and a recovery in loan growth. The sector remains attractively valued, with deregulation and AI-driven efficiency gains supporting earnings, while mid-cap banks offer early-cycle opportunities.
Currency Markets Expect Dollar Weakness
The U.S. dollar is likely to face renewed pressure in 2026 as the Federal Reserve moves to cut rates to support a cooling labour market. Political uncertainty, including the appointment of a new Fed chair, is expected to add volatility. A weaker dollar could boost emerging-market currencies such as China's yuan and Brazil's real, while diverging policy paths increasingly shape currency movements.
Commodity-linked currencies, including the Australian and New Zealand dollars, could gain from an improving global growth outlook. Among major peers, the euro is expected to draw support from fiscal stimulus, while Japan's yen could remain under pressure in the near term before recovering.
Emerging Markets and Bond Opportunities
Emerging markets are expected to continue attracting inflows, supported by a weaker dollar and relatively modest valuations. Improved macroeconomic stability has helped reduce volatility compared with developed markets, though political risks remain a concern, particularly as countries such as Brazil and Colombia approach elections.
High-yield and corporate bond markets are expected to remain active in 2026 as robust dealmaking boosts demand for buyout financing and major AI companies continue raising capital for data-centre investments.
| Market Segment | 2025 Performance | Growth Driver |
|---|---|---|
| High-yield Issuance (Mid-Dec 2025) | $325 billion | Up 17% from 2024 |
| Market Comparison | Strongest since 2021 | Pandemic-era peak levels |
Event Contracts Gain Traction
Event contracts, which allow users to wager on real-world outcomes across politics, sports and financial markets, are expected to emerge as one of the fastest-growing asset classes, fueled by rising retail participation. The products gained prominence ahead of the 2024 U.S. presidential election and have since spurred a wave of new startups.
| Market Metric | Current Status | Future Projection |
|---|---|---|
| Current Revenue | Nearly $2 billion | Could increase fivefold by 2030 |
| Growth Driver | Institutional participation | Rising retail engagement |
Analysts at Citizens Financial estimate the market currently generates nearly $2 billion in revenue, a figure that could increase fivefold by 2030 as institutional participation grows. However, the rapid expansion has attracted scrutiny from state regulators, who argue that the contracts resemble sports betting and may encourage excessive speculation.
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