Sector rotation is a common occurrence in which investors move money out of market sectors that look overbought and into ones that seem undervalued. In 2026, that means rotating away from mega-cap technology stocks and into value stocks, particularly those in defensive sectors like energy and consumer staples.
The keyword is overvalued. Big tech has been running hot for over two years. That's due to the emergence of artificial intelligence (AI). Despite concerns of a dot-com bubble repeat, investors mostly ignored the lofty valuations of many of these stocks.
