Stocks may have more room to run, and not just in mega-cap technology names. Michael Kantrowitz, chief investment strategist at Piper Sandler, said strength is spreading across indexes as lower interest rates revive risk appetite and could sustain gains into 2026. His comments point to a market turning point, where breadth improves and rate relief supports more sectors.
Broadening participation replaces a tech-only story
For much of the recent cycle, market leadership was concentrated in large technology and communication names. Investors leaned on cash-generating giants while rates were high and growth was uncertain. That pattern now shows signs of shifting as more groups participate.
“The rally isn’t only about tech,” said Kantrowitz. “Strength is spreading across indexes.”
Broader participation often signals healthier risk sentiment. When more stocks advance together, investors gain confidence that earnings growth is not limited to a few sectors. This can help reduce volatility tied to single-company headlines and give portfolios a steadier base.
Rates ease, valuations breathe
Lower interest rates tend to support higher equity valuations by reducing discount rates on future earnings. They can also lower corporate borrowing costs, freeing up cash for investment, hiring, and buybacks. Kantrowitz linked the recent market tone to rate relief and the path he sees ahead.
“Lower rates are helping fuel gains into 2026.”
Rate-sensitive corners of the market stand to benefit. Small and mid-cap companies, which often carry higher financing costs, can see margins improve as yields decline. Financials may get relief if funding costs fall faster than loan yields reset. Real estate investment trusts can catch a bid as cap rates adjust and refinancing stress eases.
What broad strength could mean for investors
Expanding leadership can reshape portfolios that were concentrated in a handful of winners. Diversification across size, sector, and style may become more valuable if earnings growth evens out.
- Quality cyclicals could gain if economic data stays steady.
- Industrials and materials may track any pickup in capital spending.
- Healthcare and consumer services can benefit from stable employment and wage trends.
Index performance can also shift. When breadth improves, equal-weighted versions of major indexes sometimes close the gap with their market-cap peers. That rotation can change performance rankings across funds tied to different weighting schemes.
Risks and counterpoints
The path is not risk-free. A flare-up in inflation could stall rate cuts and weigh on valuations. A growth slowdown would pressure revenue and margins, limiting the earnings support that equities need. Some fund managers caution that profits and cash flow must justify higher multiples, especially after a strong run.
Geopolitical tensions and election-year policy shifts add uncertainty. Supply chains are steadier than in past years, but energy prices and shipping costs can still swing. Any surprise in corporate guidance during earnings season could test the breadth theme.
Signals to watch
Investors tracking the durability of this shift can watch a few markers. Market breadth indicators, such as the number of stocks making new highs across major indexes, can confirm participation. Credit spreads offer a window into funding conditions for smaller firms. The direction of two-year yields reflects expectations for policy in the near term, while the 10-year yield frames discount rates for longer-dated cash flows.
Earnings revisions across sectors provide another check. If analysts lift estimates for cyclical and rate-sensitive groups, it would support the case for a wider rally.
Kantrowitz’s message is clear: leadership is widening, and easier rates may extend the cycle. The coming quarters will test whether earnings momentum follows. If inflation stays contained and growth holds, investors could see gains broaden through 2026. Watch market breadth, credit conditions, and earnings guidance for confirmation—or early warnings.
