Tech stocks have surged since the major market averages bottomed on March 30, rising above old highs that had been a ceiling since October. With the tech resurgence, though, the stocks that had benefited from the sector's woes early in the year are themselves suddenly getting left behind. In late 2025 and early 2026, a great rotation defined U.S. equity trading — from large to small, from growth to value — even as indexes such as the S & P 500 traded in a relatively narrow range for months. The rotation made energy, materials and consumer staples the top-performing sectors to start the year, through mid-February . Small-caps found love as the Russell 2000 index spiked more than 9.5% in just the first three weeks of 2026. The reversal validated investors who entered the year urging an equal-weight approach to the market rather than one dominated by the prior three years' megacap leaders. But since the market bottom in late March, leadership has shifted. Information technology and communication services have surged 20% and 16.5%, respectively, outperforming the S & P's 11.4% gain, through the Tuesday close. Energy stocks that had soared alongside the price of oil are suddenly down 10.3% as crude comes off its highs. Materials companies are up 5.5% and consumer staples little changed, lagging the market. .SPX .GSPE,.GSPT,.GSPS,.GSPM line 2026-03-30 .SPX vs. .GSPE vs. .GSPT vs. .GSPS vs. .GPSM since March 30, 2026 chart. "We had such a violent rotation in such a short period of time, and it makes sense for investors, especially looking at earnings season, to perhaps look back at some of the darlings within the ' Magnificent Seven ,'" said Timothy Chubb, chief investment officer at Girard Advisory Services. So high for so long Part of the reason behind the rotation in January and February was simply because tech flew so high for so long, while other parts of the market lagged despite a growing economy. And one of the reasons behind the reversal of the reversal is simply that technology is still selling far below its October valuation, even after this latest revival. The forward price-to-earnings ratio on the Roundhill Magnificent Seven ETF fell 28%, to 24.6 on March 30 from 34.3 on October 29, when the Nasdaq Composite closed at a then-record. The Nasdaq has closed at six new records this month alone, including on Wednesday. By contrast, the forward multiple on consumer staples stocks in February surged to the highest since the early 2000s, while energy and materials hit their highest valuations since 2021. Falling tech valuations have come as earnings have kept growing, said Stephen Kolano, CIO at Integrated Partners. "You have not seen negative revisions to estimates," he said, and investors lately are just returning to the secular growth theme that's focused on the long-term potential of artificial intelligence, ignoring earlier concerns focused on the economic consequences of the war in the Middle East , Kolano said. Chubb said the majority of investors will keep turning back to what has been the driver of the bull run since late 2022. "Investors are going to be looking for where the durable compounders are, where quality is, where growth is more durable on a secular basis as opposed to a cyclical basis," he said. "And I think that leads you back to technology." Rotation revival Others think the earlier rotation winners will bounce back. Waddell & Associates CEO David Waddell says the market will prove ready again to embrace a strong economy once uncertainty in the Middle East dissipates. "We're in the everything rally," he said. "If you look at the sectors, the number of upgrades this earnings season … It's ubiquitous. It's in every sector." Consumer discretionary stocks were hit hard when the war broke out, for example, but are now the third best sector since the March bottom, up 14.5% through Tuesday. They've been helped as the military conflict died down and as investors thought through the impact of an 11.2% rise in tax refunds as of April 10 , Waddell said. .SPX .RUT,.GSPD line 2026-03-30 S & P 500 vs Russell 2000 vs S & P 500 consumer discretionary stocks since March 30 And small caps continue to outperform. The Russell 2000 is up 14.5% since March 30, despite diminished prospects for interest rate cuts this year, boosted partly by the index's tilt toward hard asset sectors.
