My Top Sectors for the Next 12 Months

Editor's note: The news is full of surprises that move markets. But according to Matt Weinschenk, Stansberry Research's director of research, the strongest portfolios focus on sectors that can thrive regardless of the noise. In today's Weekend Edition, we're taking a break from our usual fare to share his insights, adapted from the weekly This Week on Wall Street. Read on to find out which areas Matt believes could be the market's best "hunting grounds" in 2026…

We're less than a month into 2026... and it already doesn't feel like the kind of year that will stand up to predictions.

The news, particularly from global politics, has been full of surprises that will have long-lasting effects.

That said, we still need to prepare our portfolios for the year ahead.

And while many believe it's the skill of an investor to predict things like the ouster of a Venezuelan president or the potential downfall of the Iranian regime... the best investors do the opposite.

They invest in assets that are insulated from such volatility.

There are hundreds of high-quality stocks with businesses that don't care about geopolitics.

How many burgers McDonald's (MCD) sells depends on consumers. How much Big Tech earns depends on how much each company spends in the AI race.

Business is business. What drives different sectors are big trends... not necessarily headlines.

And you can get a big edge by knowing which sectors are set up for success. Today, I'm going to point you to the best ones.

We'll start with the one I expect will lead the pack...

'Tech' Reigns Again

In finance, all stocks are classified into precisely 11 sectors: communication services, information technology, industrials, financials, utilities, health care, materials, consumer discretionary, energy, consumer staples, and real estate.

Before 2018, information technology and telecommunications were part of the same sector. But that was reshuffled, and telecommunications became communication services to account for all telecom, media, and entertainment companies.

Communication services now includes Internet-based tech firms like Alphabet (GOOGL), Meta Platforms (META), and Netflix (NFLX).

So to capture what most people think of as "tech stocks," you should look at both.

And in 2025, the performance was (obviously) all about technology...

In recent years, the AI boom has driven all kinds of tech stocks higher. As you can see above, communication services and information technology were the top performers last year.

Don't expect that to stop in 2026.

Yes, the AI boom will continue. It may have a pullback. But it was the main investing story of 2023, 2024, 2025... and will take the crown again.

That doesn't mean it'll look exactly the same...

This year, the AI focus will start to move down the value chain. So far, the real winners have been the "picks and shovels" plays. In other words, it's not the AI companies themselves making money... Rather, it's the companies building data centers for AI companies.

Chipmaker Nvidia (NVDA), networking giant Cisco Systems (CSCO), and other hardware plays all had a great 2025. And they drove the information technology sector higher.

At the same time, Alphabet carried communication services higher.

Now that AI is helping build real businesses, the software side will pick up. And communication services will benefit in a big way.

This looks like a second-half-of-the-year story to me. AI will take longer than many expect to infiltrate the economy.

But these will be the sectors that make or break 2026... And the momentum is still very positive.

You can easily tilt your portfolio toward these sectors with funds like the State Street Technology Select Sector SPDR Fund (XLK) and the State Street Communication Services Select Sector SPDR Fund (XLC).

Health Care (and Biotech) Step Up

For most of 2025, health care looked weak.

Investors were more interested in hot AI stocks. And Robert F. Kennedy Jr., the new secretary for the Department of Health and Human Services ("HHS"), was a highly unpredictable signal of upcoming changes in health care policy.

So investors saw low upside and broad uncertainty for health care... Not a great mix.

That will change this year – for two reasons.

First, health care's underperformance has reached an extreme. Over the past three years, the sector has underperformed by more than 30 percentage points...

Second, health care has historically offered safety in volatile markets.

I'm bullish on the market, but I also see a volatile year ahead. Investors will learn to appreciate the profitable, recession-proof businesses in the health care sector.

And after the HHS's restructuring, initiated by the Department of Government Efficiency, new health care policies have been less shocking to the market than feared.

As you can see, health care started to rally in late 2025. That's a sign the market is coming around to this sector...

Within the health care sector, there's also opportunity in a particular industry: biotechnology.

These are the cutting-edge companies pursuing new treatments and cures.

They're typically speculative stocks. But from a top-down perspective, the industry looks ripe for a big year.

Despite breakthroughs in cancer, weight loss, diagnostics, genetics, and more, biotech stocks have lagged in recent years. Based on the science, this sector should be booming.

Instead, shares are cheap. And if interest rates fall, that'll be a boon for biotech stocks (since their potential future earnings will have a greater present value).

You can get exposure to health care via the State Street Health Care Select Sector SPDR Fund (XLV) and biotech through the iShares Biotechnology Fund (IBB).

While the exchange-traded funds I mentioned today aren't official recommendations, they're great ways to tilt your portfolio toward tech and health care.

If you prefer to invest in individual stocks... these sectors should be your hunting ground for new ideas.

Every year offers different opportunities. And these are the ones to watch in 2026.

Good investing,

Matt Weinschenk

Editor's note: Markets are entering one of the most uncertain stretches in years. That's why five of Stansberry Research's top analysts are coming together for a rare joint briefing this Tuesday. They'll lay out their full strategy for 2026 – including the one investment strategy they believe matters most as the next market phase begins.