Despite recent underperformance in the technology sector, Wolfe Research anticipates that its market leadership will remain strong. According to Chris Senyek, housing activity, auto production, non-AI capital expenditure, and oil and gas activity are expected to remain sluggish. This suggests that market leadership will likely stay concentrated as concerns about AI spending ease in the new year.
Senyek noted that technology and communication services sectors uniquely combine secular growth and leverage to any economic upswing. These sectors boast more than double the revenue and earnings per share growth compared to the rest of the market. Furthermore, their large weighting in various funds means they tend to benefit from fund flows, particularly at the start of the year.
The technology sector includes companies involved in the innovation, development, and distribution of technological goods and services. The communication services sector encompasses telecommunication, media, and entertainment companies.
“These sectors contain, by far, the highest percentage of companies growing revenues 10 per cent plus in 2026, highest year-to-date [earnings per share] revisions, and it’s too contrarian to fade tech’s streak of outperforming the market 11 out of the past 12 years,” Senyek stated, reinforcing a positive outlook for tech and communication services.
