In 2025, the stock market saw a strong performance, with Big Tech and mega-cap stocks leading the way. AI played a significant role, accounting for 40% of gains in the tech sector. Despite predictions of a market rotation, the dominance of these sectors continued, mirroring previous years.

Analysts have been calling for a rotation to small-company and value stocks, but these forecasts have not materialized. The top 10 companies in the S&P 500 account for 40% of its value, with most benefiting from the AI-driven tech rally. Concerns about overvaluation and lack of diversification persist.

The IPO market is expected to heat up in 2026, especially in cybersecurity. Netskope and Rubrik had successful IPOs, with several startups poised to follow. Investors are keeping an eye on upcoming cybersecurity IPOs that could make their way to the public market this year.

The December jobs report will provide crucial data on the state of hiring in the US economy. Economists expect payroll employment to rise by 65,000 in December, with the unemployment rate dipping back to 4.5%. Another weak reading could prompt more rate cuts, influencing the future direction of the economy.

Read more at Morningstar: Markets Brief: When Will We Get a Real US Stock Market Rotation?