Leadership rotation

Waning momentum of tech giants in 2026 market leadership

Momentum is a wonderful thing, and that was seen in abundance in 2025, with global equity markets experiencing their third straight year of strong performance.

Of course it wasn’t all smooth sailing, as we now know that nothing with the current leadership in Washington will be easy. That was made abundantly clear in early April as the barrage of “liberation day” tariffs hit markets, resulting in equity markets looking at risk of losing their multi-year winning streak. Yet after one of the stronger rallies on record, we ended December with most markets at all-time highs.

For a year of many positives, it’s sometimes difficult to find what was the most impactful. But after the prior years’ rally being led by only a handful of companies, seeing it broaden out is a development all should cheer on.

The AI revolution continues as a driving force in all our lives and dominates the headlines, yet the story is evolving. Elsewhere in the technology sector, we may finally have seen the end of the dominance of the so called “MAG7” stocks theme, as only two of the seven, NVIDIA Corp. (NSD: NVDA) and Alphabet Inc. (NSD: GOOGL), beat the S&P 500 Index.

Real concerns around the financing and profitability of data centres are beginning to pop up, with cracks appearing in the bond market first. The rise and fall of Oracle Corp. (NYSE: ORCL) is one of the high (or low) lights to take note of. Semiconductor companies continue to dominate and will set the tone once again in the new year. We continue to watch for more ways to gain exposure to the AI theme.

In terms of predicting what will be the dominant story for 2026, it’s hard to look past the U.S. Federal Reserve’s Open Market Committee (FOMC) and geopolitical threats. The U.S. finally joined the rate-cutting party in 2025, and more cuts could be coming, but we need to first find out who will be leading the FOMC going forward. The new Fed chair decision will be one of the most politically driven in history, and investors will be watching closely.

Markets hate uncertainty, and there seems to be more of that risk from Washington than ever. What might become the lasting legacy of President Trump is that global investors are finally starting to allocate to other markets to get away from these headlines. Many international markets outperformed the U.S. in 2025, and given their valuation discount, look situated to do so once again. Observers calling “the end of American exceptionalism” are picking up.

Supercharged trade of the year

These concerns around the U.S. have been most acutely felt in the currency market. The U.S. dollar has been under pressure for the last few years, acting as a great tailwind for real assets. This move helped to supercharge the winning trade of the year: precious metals.

A lower dollar, combined with easy money, sticky inflation, and increased central bank reserve buying, has driven gold and silver to record levels. Gold was higher by 60% for the year, silver by over 150%. An asset that many had written off as a historical relic, suddenly was leading the pack.

The strength of the materials sector drove the S&P/TSX Composite Index higher by 1.3% during December 2025 and 32.2% for 2025, and brought more attention to the Canadian market. However it wasn’t only resources. It can’t be overlooked that many financial stocks were among the top performing. As several wise market watchers have stated, “good things happen when banks lead.”

Much like preview notes looking forward to 2025, earnings growth will be needed to keep the positive momentum. But seeing a market less dependent on a few themes or companies is a massive positive. As rates continue to drift lower and policy remains market-friendly, the setup for the new year remains healthy. But don’t look for the old leaders to take us higher; this move should see the lagging sectors join in the fun.

Greg Taylor, CFA, is the Chief Investment Officer and a Portfolio Manager at PenderFund Capital Management.

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