Last week, I shared my top predictions for 2026.
I covered some big-picture economic and political shifts I see taking hold... including continued inflation, a monster blue wave, and a rise in solar power.
Today, I want to look at specific market moves you should expect next year.
In particular, I'm going to discuss three big trends in the stock market and whether or not they'll continue through 2026.
Keep in mind, these are relative trends... meaning we're comparing assets against each other, rather than predicting which way a certain stock or sector will move.
But these trends are extremely important. As you'll see, they'll lay the framework for how to position your portfolio.
Let's start with the biggest reversal you need to watch for...
A Rally for the 493 (and Beyond)
The Magnificent Seven and other mega-cap tech stocks have dominated the market for half a decade.
Many prognosticators called for this trend to turn around... only for the Mag 7 to keep plowing ahead.
But 2026 is the year the rest of the market catches up.
Let me be clear: Big Tech has earned its outperformance with incredible earnings. But that's going to taper off – and not because these businesses will turn south... Rather, these companies are spending so much on AI that it's going to slow profit growth.
That doesn't mean I'm bearish on AI. I just see the productivity gains spreading throughout the rest of the economy. AI efficiency will boost other firms' margins, allowing their stocks to catch up.
In other words, AI will do less for AI stocks and more for others.
This is more of a second half of the year play, but there are already signs...
Take C.H. Robinson Worldwide (CHRW), for example.
Its business is far from a hot AI play. The company manages shipping logistics by setting prices and scheduling transportation for cargo across the world. It links shippers from all sorts of industries with its massive network of independent ground, ocean, and air carriers.
Even so, C.H. Robinson has more than 30 AI "agents" scanning its databases to automate work. And management claims that the time to deliver a quote has dropped from 17 to 20 minutes... to 32 seconds.
Upon sharing this and other productivity news in its latest earnings report, C.H. Robinson's stock soared nearly 20%...
As AI efficiency spreads, expect better returns from "the 493" – the remaining S&P 500 companies outside the Mag 7.
Specifically, an S&P 500 equal-weight fund like the Invesco S&P 500 Equal Weight Fund (RSP) will outperform the market-weighted SPDR S&P 500 Fund (SPY).
And I think you'll do even better if you go smaller...
Small-cap stocks like those in the S&P Small Cap 600 Index or the Russell 2000 Index have lagged large caps since 2021.
In the chart below, you can see the ratio of the Russell 1000 Index (representing large-cap stocks) to the Russell 2000 (representing small caps). When the ratio rises, large caps are outperforming. When it declines, like it has in recent months, small caps are outperforming...
Again, many have called for this reversal for years... and it hasn't happened.
But it's time. Valuations have reached extremes. Lower interest rates favor smaller stocks. Big Tech spending will crimp margins. And AI will start to create efficiencies for smaller businesses.
This shift will take place in 2026.
Specifically, look for the State Street SPDR Portfolio S&P 600 Small Cap Fund (SPSM) and the iShares Russell 2000 Fund (IWM) to both outperform the S&P 500.
Moving on, let's look at two important trends that will continue next year...
Growth Is (Still) the Place to Be
At the same time many have called for a small-cap rebound, just as many have argued for the return of value stocks.
I don't see it happening this year.
Here's why...
In the market, there are times when expensive stocks with high growth keep getting more expensive. There are also times when cheap stocks trading below their intrinsic value see huge upside.
In other words, sometimes it pays to bet on growth... and sometimes it pays to bet on value.
Using a similar ratio chart to the one above, you can see that growth stocks (as measured by the Russell 1000 Growth Index) have outperformed value stocks (as measured by the Russell 1000 Value Index) for nearly a decade. And it's gotten to an extreme...
This trend will persist through 2026.
Even if AI enthusiasm cools for a bit, we're still in a period of technological change. And if a company is trading for a truly cheap valuation, it's likely headed for obsolescence. As a value investor would say, there are too many "value traps" to worry about.
Moreover, lower interest rates favor growth stocks (since future earnings have a greater present value).
I love value stocks. They'll return someday. But for now, keep your portfolio tilted toward growth.
International Will Continue Outperforming
In 2025, international stocks beat the U.S. by a wide margin – the widest we've seen in at least 30 years...
And that's despite the fact that the biggest story in business – artificial intelligence – is almost entirely a U.S. story.
Two changes drove this...
First, the long-term underperformance of international stocks left them extremely undervalued. They were bound for a comeback.
Second, the U.S. dollar declined nearly 10%. That meant the holdings of foreign stocks performed better in dollar terms.
Both are still true today.
By some metrics, non-U.S. stocks are more than 30% cheaper than U.S. stocks.
And while the dollar rebounded some in the second half of 2025, it's still headed down. It also tends to move in long, multiyear cycles... so there's no reason to expect a reversal anytime soon.
Expect "rest of the world" investments like the Vanguard FTSE All-World ex-U.S. Fund (VEU) and the iShares Core MSCI Total International Stock Fund (IXUS) to outperform the S&P 500.
Wrapping up, I don't want you to use these forecasts to go long growth stocks and short value stocks... or anything so direct.
Instead, these broad perspectives can inform the way you construct your portfolio and what hunting ground you patrol for your investment opportunities this year.
Next week, I'll help you narrow your search even further... by giving you the sectors and industries I expect to perform best.
What Our Experts Are Reading and Sharing...
- President Donald Trump has "ordered" Fannie Mae and Freddie Mac to buy $200 billion worth of mortgage bonds in an effort to lower interest rates and make homes more affordable. Even the Wall Street Journal points out this type of policy was "at the heart of the 2008-09 financial crisis." (And don't forget, the problem is a housing shortage. Lowering rates just adds more buyers and drives up prices.)
- In a sign of confidence in the current commodity and mining boom, commodity-trading giant Glencore (GLEN.L) and mining behemoth Rio Tinto (RIO) have resumed talks over their potential $260 billion megamerger.
- Given Chinese competition in the electric-vehicle space, Tesla's (TSLA) elevated share price is now supported by a promised future of humanoid robots. CEO Elon Musk expects the company's general-purpose Optimus robot to outperform, though reports from the Consumer Electronics Show in Las Vegas say China's robots are "everywhere."
New Research in The Stansberry Investor Suite...
Everyone in the stock market likes to focus on returns. Not many understand that to actually get rich, you also need to focus on risk.
The N.E.W. System – our brand-new AI-driven portfolio – was designed with this very concept in mind. It picks the best businesses... but does so in a way that minimizes your losses and maximizes your returns.
And this month, editor Whitney Tilson and Alan Gula focus on a particular stock that does the same.
As they explain, one N.E.W. System holding has delivered incredible returns for shareholders by understanding exactly how to price risk.
It has an irreplaceable database with more the 36 billion statistical records. Insurance companies pay this company a bundle to precisely predict the risks and costs of storms, fires, accidents, and so much more.
A full 80% of its revenue comes from recurring subscriptions from insurance companies... and those subscriptions form a central part of those companies' businesses. That makes for "sticky" revenues, which leads to stable growth and consistent profits.
Since 2009, shareholders have earned a market-beating 15.7% per year (including dividends). Shares have fallen recently after a quarter of low weather activity. But as Whitney and Alan explain, this short-term noise isn't a problem for their strategy.
Stansberry Investor Suite subscribers can read the entire report here.
If you don't already subscribe to The Stansberry Investor Suite – and want to learn more about our special package of research – click here.
Until next week,
Matt Weinschenk
Publisher and Director of Research
What do you think about This Week on Wall Street? Send any and all feedback to thisweek@stansberryresearch.com. We read every e-mail you send in.
