U.S. equities could rally beyond their usual mega-cap leaders in the first half of 2026, helped by tax refunds for households and stronger earnings growth among companies, Wells Fargo strategists said.
In a note, the brokerage said heavily shorted stocks in the Russell 3000 could outperform as investors rotate into laggards and cover bearish bets.
It also said more S&P 500 stocks could break above their one-year highs, a shift that would ease concentration risk for investors.
A broader market rally would mark a shift from the mega-cap dominance that has characterized recent years, potentially boosting sentiment as investors navigate geopolitical tensions and lingering AI valuation concerns.
The brokerage expects financials, materials, energy and technology shares to outperform. The S&P 500 energy index, in particular, could stand out as around 70 per cent of the companies in the index could directly benefit from investment opportunities in Venezuela.
In a social media post on Tuesday, President Donald Trump said the U.S. had struck a deal to import up to US$2-billion worth of Venezuelan crude, a development that is already reshaping oil market dynamics.
Wells Fargo also said it expects tax refunds to rise by US$800 per person versus last year, a jump it said could encourage risk-taking and add fuel to a broader rally.