Are You Overlooking These 5 Investment Opportunities in 2026?

Will U.S. stocks follow up another above-average year for the market with more gains in 2026?

The broad consensus among Wall Street's research community is "yes." And although there's plenty of variance among targets for the S&P 500's final print at the end of this year, the "smart money" believes the arrow will at least be pointed north. Most expect, even in the face of uncertain Federal Reserve and governmental policy, and a hardly stable economic footing, that the index will close up by high single or low double digits.

That will largely come on the back of artificial intelligence (AI), many say. Yes, after a 2025 that saw several AI-connected stocks such as Nvidia (NVDA), Broadcom (AVGO), and Alphabet (GOOGL) put up returns in the 30%-60% range, large-cap AI plays still have runway to spare… but also, productivity gains from AI could help the earnings potential of companies nowhere near the tech sector, some say.

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Those two storylines are likely to dominate most market talk as we begin the new year. So let's talk about something else instead.

There's (much, much) more to the equity markets than the broader S&P 500 and AI stocks, and today we're going to give a little dose of oxygen to the other batches of companies that have hit Wall Street's radar.

With that, let's cover five investment opportunities you might be overlooking in 2026.

1. U.S. financial stocks

It's déjà vu all over again. A year after predicting a big year for the financial sector, Wall Street thinks Wall Street will be great in 2026, too.

We wouldn't blame you for taking that advice with a grain of salt. Belief that a deregulation- and M&A-friendly Trump administration would set banks on fire in 2025 was a bit misplaced — financial stocks did just fine in 2025, though they lagged the broader market by a point or two.

Still, says the Wells Fargo Investment Institute, you can expect those same drivers (and others) to lift the sector. "Financials will likely benefit from a widening spread between short- and long-term interest rates, deregulation, accelerating M&A activity, plus likely low rates of delinquency and default in their credit portfolios," WFII says in its 2026 outlook.

A few segments to watch?

• "Investment banking revenues have grown more than 50% based on increased mergers and acquisitions activity and initial public offerings," says Jeremiah Buckley, portfolio manager at Janus Henderson. "We think capital markets activity will be strong for the next couple of years as funding continues for the AI capital expenditure investment cycle, potentially benefiting investment banks, ratings agencies, and exchanges."
• Buckley also nods toward digital payment companies, which "have continued to grow earnings at a 15% annual clip as consumer spending remains strong."
• The front-runner to replace Jerome Powell as Fed chair in 2026 is Kevin Hassett, currently the director of the National Economic Council of the United States. This transition could drive steep yield-curve conditions, says UBS analyst Erika Najarian, and "a steeper curve is generally even better for regionals vs. money centers." UBS' top regional bank pick for 2026 is Huntington Bank (HBAN), which expanded further into the South with its October acquisition of Cadence Bank (CADE).

You can leverage financials more broadly via bank ETFs, though one of our best mutual funds to invest in 2026 tackles the sector, too.

2. European banks

The pros' love of financial companies isn't confined to American firms. They're equally enthusiastic about European banks a year after they clobbered their U.S. counterparts. Indeed, while the S&P 500's financial companies were grinding out a 2025 gain in the mid-teens, the Euro Stoxx Banks index was pumping out a wild 80% return — outdoing even the Magnificent Seven.

A common refrain among Wall Street's experts is that the sector remains inexpensive even after its world-beating performance in 2025.

"European banks remain one of the most compelling opportunities despite a strong run over the last two years," say Janus portfolio managers Julian McManus and Christopher O'Malley. "Valuations are still modest relative to the sector's improved fundamentals, even as profitability has reached levels not seen in well over a decade."

But they're not just a value play. A team of UBS analysts believes Europe's real gross domestic product (GDP) growth will accelerate in 2026, and that European banks will "continue to garner upgrades on effective cost-cutting and loan growth."

Citi, also Overweight (Buy) on European banks for 2026, lists the U.K.'s HSBC (HSBC) and NatWest Group (NWG), and France's Société Générale (SCGLY) as its top stock picks. "And we add positive catalyst watches on all three as we expect all to provide upbeat 2026 guidance," says Citi analyst Andrew Coombs.

3. U.S. small caps

The past 10 years have been something of a "lost decade" for small-cap stocks. The small-cap Russell 2000 Index has underperformed the large-cap S&P 500 Index in eight of the past 10 years. And on a pure price basis, the Russell trails the S&P 500 by more than 120 percentage points since the start of 2015.

However, while a bullish prediction on David over Goliath makes for a low-percentage call, several experts still look favorably upon more diminutive equities.

BofA Global Research analyst Jill Carey Hall cites a litany of favorable drivers for small caps in 2026, including higher earnings-per-share (EPS) growth for small caps (18%) versus mid- (16%) and large-cap stocks (13%), expectations for further rate cuts and the potential for lower tariffs and deregulation, among other things. "Small caps are still the cheapest part of the market," she adds.

Jefferies is calling for above-average returns for the Russell 2000 in 2026, too, thanks to above-average earnings growth. "We looked at 13 factors and think small caps rise 12% in '26, beat large caps, with the Russell 2000 hitting a new high at 2,825 based on 12/8 prices," says Jefferies equity strategist Steven G. DeSanctis.

While the Russell 2000 trails the S&P 500 as I write this, it has been in catch-up mode and has outperformed the large-cap benchmark over the past six months.

William Blair analysts Richard de Chazal and Louis Mukama believe this rally is based largely on actual and expected rate cuts, but see that transitioning to a new stage of the rally "based on attractive valuations, an earnings recovery out of a small-cap recession, a broadening-out of economic growth in the real economy, increasing capital markets activity, a steeper yield curve … and an increased desire on the part of investors for diversification at a time when the stock/bond correlation remains positive."

The Vanguard Russell 2000 Index Fund ETF (VTWO) is the cheapest Russell 2000 tracking ETF, charging just 7 basis points annually. (A basis point is one one-hundredth of a percentage point.)

4. Japanese stocks

While the research set is generally optimistic about international equities, Japan is near the top of the heap of their favored single-country opportunities.

"Among the landscape of investment opportunities abroad, Japanese equities continue to stand out due to discount valuations, compelling earnings trends, and a commitment to corporate reform efforts," say Jason Pride and Michael Reynolds of wealth management firm Glenmede. "When it comes to shareholder-friendly corporate reform efforts, Prime Minister [Sanae] Takaichi appears cut from the same cloth as the late Shinzo Abe. She has endorsed key tenets of the ‘Abenomics' platform, which calls for fiscal stimulus and dedication to ongoing corporate reform."

Indeed, Japan's economy should "maintain steady growth in 2026, driven by domestic demand and supported by fiscal stimulus," says BofA Global Research's Takayasu Kudo. The firm has raised real GDP forecasts to 1.3% year-over-year (from 0.9%) for full-year 2025, and to 0.7% (from 0.5%) for 2026, believing consumption and expansionary fiscal policy will help stimulate economic growth.

JPMorgan's Rie Nishihara agrees, citing economic stimulus from "Sanaenomics," as well as ongoing corporate reforms, in the firm's 3,750 price target (10% upside) for the TOPIX index of Japanese stocks. "Corporate earnings are normalizing after last year's tariff impact, and we expect increased investment and productivity under the new government to further drive growth. EPS is projected to grow by approximately 16% over FY2025-26," she says.

Several analysts say to target Japanese stocks tied to Takaichi's economic policies, including defense firms, consumer stocks and AI chipmakers.

5. AI losers

OK, OK. I know I started this article saying we wouldn't talk about artificial intelligence, but there's one AI angle that doesn't get enough play: potential losers.

And while that might not seem like an investment opportunity, I'd argue that sometimes your best investments are the ones you don't make.

"The AI narrative is not about to magically disappear, but the narrative of the AI gains might pivot," says Sam Rines, macro strategist at WisdomTree. "It is all about 'Chips to Margins.' As AI becomes increasingly embedded in day-to-day life, there may / should / will be more emphasis on who is getting the ‘most margin for the buck.'"

Put differently: A rising tide isn't going to lift every last boat.

A great look at potential AI losers comes from Wedbush, which is arguably one of the technology's greatest cheerleaders from the Wall Street research community.

"We are cognizant of amplified disruption from tectonic shifts in behavior across enterprises and consumers," writes a team of Wedbush analysts in a report that "identifies tech companies with the highest probability of being left in the dust during the next phase of AI transformation."

For instance, Wedbush notes that autonomous vehicles (AVs) are no longer a thing of the future, but of the now. But "as AV networks scale, the value accrues to platforms that own (1) the fleet, (2) the data exhaust, and (3) the closed-loop economics. This fundamentally weakens the asset-light rideshare model of Uber (UBER) and Lyft (LYFT)."

Wedbush also sees artificial intelligence disrupting the advertising space, with autonomous AI agents making decisions and optimizing spending without a human at the wheel.

"As these systems mature, ad budgets increasingly concentrate on platforms that provide full-funnel visibility and immediate ROI," the group writes. "Social discovery environments like Pinterest (PINS) and ad networks that rely on intent signals without determining purchase data on the open web, such as Trade Desk (TTD)" will lose leverage as companies prioritize "conversion-proven ecosystems" like those found on Amazon.com (AMZN), Meta Platforms (META) and Alphabet's Google.

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