Financials account for the largest sector weight in the Dow Jones Industrial Average, at roughly 27%, which helps explain its relative underperformance versus the Nasdaq 100 in 2025. The Nasdaq 100, with around 64% exposure to the Technology sector, has been the primary beneficiary of the AI-driven productivity narrative.
Looking ahead, a continuation of the Fed’s rate-cut cycle into 2026 could set the stage for a rotation within US equities. Lower interest rates tend to favour non-technology stocks with more attractive valuations and resilient earnings growth, raising the likelihood of a catch-up rally as the AI-centric advance broadens beyond mega-cap technology.
Rates and factor signals are already hinting at this shift. The US Treasury yield curve (10-year minus 2-year) has re-steepened from 0.48% on 29 October 2025 to 0.53% on 7 November 2025, coinciding with a bullish breakout in the ratio of the S&P 500 Enhanced Value ETF (with a 35% weighting in Financials) relative to the S&P 500 ETF (see Fig. 4). In contrast, the ratio of the S&P 500 Momentum ETF (36% weighted toward Information Technology) versus the S&P 500 ETF broke down on 3 November 2025, signalling waning relative leadership from momentum-heavy tech.
Taken together, a re-steepening yield curve and the emerging outperformance of the value factor point to improving relative prospects for the Dow Jones Industrial Average in 2026. To preserve its major uptrend, the US Wall Street 30 CFD Index (a proxy for Dow futures) needs to hold above the 44,975/44,260 long-term pivotal support zone (see Fig. 5) for a fresh bullish impulsive move, opening up scope for the next major resistances to come in at 49,220/49,670, 51,630, and 53,140/53,590.
Conversely, a failure to defend the 44,260 key support level would threaten the broader uptrend and raise the risk of a deeper corrective decline toward the next major supports at 40,830 and potentially 36,620.
Next, we turn to what may lie ahead for the Hong Kong and Japanese stock markets in 2026.
