U.S. Tech Stocks May Not Be So Exceptional in 2026

Ed Yardeni says investors should reduce their holdings of the Magnificent Seven tech stocks—Tesla, Alphabet, Apple, Nvidia, Amazon.com, Meta Platforms, and Microsoft—to match their share in the S&P 500. (Brandon Bell/Getty Images)

Key Points

• Ed Yardeni advises investors to shift from U.S. exceptionalism to a balanced view, recognizing technology’s global impact.
• Yardeni recommends scaling back holdings of the Magnificent Seven to match their weighting in the S&P 500.
• Information technology and communication services sectors comprise 45% of the S&P 500’s market value and 38.6% of expected earnings.

One of the most accurate forecasters in Wall Street history is calling for a change in one of the stock market’s most successful investment strategies heading into what could be a game-changing year for the S&P 500 .

Ed Yardeni, founder and chief investment strategist at Yardeni Research, is advising clients to shift their focus away from U.S. exceptionalism, or the idea that American innovation, regulation, and capital markets mean the country’s markets will outperform. He favors a more balanced view that captures how technological changes will affect both the domestic and global economy.

“Our spin is that every company is evolving into a technology company,” Yardeni said in a note published Sunday. And that evolution now means “globalization is being driven by consumers seeking prosperity [in] the race for technological advancements” instead of “producers
seeking cheap labor and more markets.”

Yardeni, who holds a Ph.D. in economics from Yale, correctly predicted in 1995 that the Dow Jones Industrial Average would hit the 10,000- point mark by 2000. He is also credited with coining the term “bond vigilantes” to describe how fixed-income markets push back against fiscal or monetary policy deemed damaging to the economy.

U.S. stocks, which trade at more expensive valuations than their international peers, comprise around 65% of Morgan Stanley Capital International’s All Country World Index benchmark. But a stand-alone index of U.S. stocks has underperformed a version that includes only non-U. S. names so far this year.

Yardeni thinks that trend will continue.

“The forward earnings of the ACW ex-US has been showing remarkable strength recently,” he said. “The resilience of corporate earnings worldwide has been remarkable, despite the geopolitical crises this year and tariff frictions between the U.S. and its trading partners.”

The boost from bringing on new technologies will echo loudly across U.S. markets in the coming year and beyond, Yardeni said. He argued that competition will erode the enormous margins megacap tech stocks have established, while those outside of the sector reap the benefits.

“We also expect that the productivity and the profit margins of the
‘Impressive 493’ will be boosted by the technologies available to do so, which are sold by the Magnificent 7 and other technology companies,” Yardeni said.

Adapting to the change means investors should trim their exposure to the Magnificent Seven tech companies, reducing their aggregate holdings of those stocks to match those stocks’ share of the S&P 500. He favors adding stocks from the financial, industrial, and healthcare sectors.

“In effect, we are recommending underweighting the Magnificent 7 and
overweighting the ‘Impressive 493’ in an S&P 500 portfolio,” Yardeni said.

Yardeni noted that together, stocks in the information technology and communications services sectors, home to many of the Magnificent Seven, account for around 45% of the S&P 500’s $58 trillion in market value. They account for a record-high 38.6% of the earnings expected over the next year.

Those numbers point to a concentration risk that investors need to manage, he said.

According to data compiled by Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, they were responsible for 42.5% of the S&P 500’s 17.8% advance as of the end of November.

“It no longer makes much sense for us to continue recommending overweighting the Information Technology and Communication Services sectors in an S&P 500 portfolio, as we have since 2010,” Yardeni said. “The same can be said about overweighting the United States in the All Country World MSCI portfolio.”

Write to Martin Baccardax at martin.baccardax@barrons.com