Strategy for 2026’s Midterm Year

However, 2026 also offers a unique situation because interest rates are falling. That could accelerate and boost value-oriented areas rich in dividend income. Here’s a way to take advantage.

Midterm Election Year Strategy

Generally, the S&P 500 (SPX) has returned about 10% for decades. That’s not the case in election years.

In fact, midterm years drastically underperform the average:

Recently, we saw it in 2018 and 2022, when stocks fell 19% and 6%, respectively.

Given this landscape, new leadership could emerge in 2026. It’s even possible technology stocks could take a back seat to areas like small-cap stocks, health care, energy, and others:

Using exchange-traded funds as proxies, the data for this period shows how non-tech sectors surged:

• iShares Core S&P Small-Cap ETF (IJR), representing the S&P Small Cap 600 index, gained 4.55%
• Health Care Select Sector SPDR ETF (XLV) surged 6.88%
• Energy Select Sector SPDR ETF (XLE) gained 5.32%
• Also holding up well were:
  • Materials Select Sector SPDR ETF (XLB)
  • Consumer Staples Select Sector SPDR ETF (XLP)
  • Financials Select Sector SPDR ETF (XLF)
• The one lagging area was technology – Technology Select Sector SPDR ETF (XLK) was down 1.3%

It’s too early to say tech will be down next year, but MoneyFlows data clearly shows a risk-on appetite for non-tech groups. Check out which areas have gained as tech fell:

Obviously, there will be tech winners and losers in 2026. But it’s possible the sector could go sideways as other areas gain ground.

Winners and Losers in Every Sector, Every Year

Market participants know there are winners and losers in every sector, every year. And right now, there are some non-tech winners making waves.

One is Walmart, Inc. (WMT), the retail giant:

Those green shoots are institutional inflow signals, indicating big buys. And it makes sense given WMT’s earnings growth over one and three years, which is 12.8% and 15.9%, respectively.

Another stock receiving Big Money attention is health care giant Eli Lilly and Company (LLY):

A leading obesity treatment company, LLY has been experiencing success with other medicines and use cases too. It’s reflected in the three-year sales and earnings growth, which is 17.4% and 32.9%, respectively.

One more non-tech stock being boosted by inflows is financial firm Morgan Stanley (MS):

MS has been seeing inflows for months. Its three-year sales growth of 21.7% and profit margin of 12.5% help make the case.

Know the Flows

Markets always move. Winners become losers, and vice versa. That’s why it pays to know the flows.

MoneyFlows data currently indicates there could be leadership changes in the upcoming midterm election year as some unloved equities turn favorable once again. MoneyFlows can help you prepare for 2026 now by identifying Big Money signals that are positioning for the future.

If you are a Registered Investment Advisor (RIA) or a serious investor, take your investing to the next level and follow our free weekly MoneyFlows insights.

Disclosure: the author owns WMT in personal and managed accounts and holds no position in LLY and MS at the time of publication.