Allspring Sees Big Opportunities for Small- and Mid-cap Equities in ’26

Group 1 - The S&P SmallCap 600 and MidCap 400 have underperformed compared to the S&P 500 over the past five years, but opportunities for smaller companies are expected to increase as the market shifts focus [2] - Allspring anticipates a rebalancing in the market, with smaller companies and sector-specific players gaining investor attention as AI technology becomes more prevalent [2][3] - Advisors may need to reconsider their allocations as the S&P 500, while currently strong, may become easier to outperform by small and mid-cap stocks in the next phase of AI development [3] Group 2 - AI and technology will remain central themes in 2026, and managers underweight in tech may face significant challenges [4] - Beyond large tech firms, various sectors are expected to benefit from AI integration into business and daily life [4] - The healthcare sector, despite facing challenges such as rising costs and policy uncertainty, is seeing advancements due to AI, which could lead to improved valuations [6] Group 3 - Allspring identifies industrials and materials as key sectors to watch, particularly for their roles in constructing data centers, highlighting companies like Amrize and Gates Corporation [6] - The healthcare sector is experiencing downward pressure on valuations, but AI advancements in personalized medicine present new investment opportunities [5][6]