What to Keep in 2026?

Which Sectors of the S&P 500 Are Worth Holding in 2026: Bank of America’s View

Bank of America has updated its strategic recommendations, and the overall signal for investors has become noticeably more conservative and selective. After several years in which the market was driven primarily by technology, the focus is gradually shifting toward defensive and undervalued segments. According to the bank’s analysts, 2026 may become a turning point for capital rotation from “expensive growth” into more resilient and fundamentally justified sectors.

Among its top priorities, Bank of America highlights two sectors: Healthcare (XLV) and Real Estate (XLRE). Both sectors have received an overweight rating with an investment horizon of approximately 12 months, meaning investors are advised to hold these sectors above their market weight.

Why Healthcare

The healthcare sector is described by analysts as the main anchor of a portfolio for 2026, for several reasons.

First, healthcare remains undervalued relative to its own historical multiples, especially when compared with the technology sector. At the same time, companies in this sector demonstrate stable cash flows and relatively low sensitivity to economic cycles.

Second, earnings forecasts have begun to improve. After a period of pressure from regulators, rising costs, and uncertainty around drug pricing, the market is gradually pricing in more stable income dynamics. This is particularly true for pharmaceuticals, medical equipment, and healthcare services.

Third, the sector has been outperforming the broader market for several months, as confirmed by the Momentum + Value model. In this model, healthcare ranks first among all S&P 500 sectors.

In other words, it is a rare combination of defensiveness, reasonable valuation, and positive momentum. For 2026, this mix looks especially attractive.

Real Estate: a Bet on Rate Stabilization

Real Estate (XLRE) has become the second key favorite. In the Momentum + Value model, the sector ranks third, which is notable for a segment that is traditionally highly sensitive to interest rates.

The core idea here is straightforward. The market has already gone through a period of maximum pressure from high interest rates. Even without sharp rate cuts, the mere stabilization of rates reduces uncertainty and improves the predictability of cash flows for REIT companies.

In addition, the real estate sector is currently trading at a significant discount to historical levels. At the same time, rental income continues to grow in many segments, and the balance between supply and demand is gradually normalizing. For investors, this represents a bet not on rapid growth, but on recovery and normalization.

Technology: Strong but No Longer Cheap

The technology sector (XLK) is rated neutral by Bank of America. This is an important nuance, as it does not imply a negative outlook. Technology remains structurally strong, particularly in areas related to AI, cloud computing, and processing power.

However, valuation is the key issue. After the powerful rally of previous years, the potential for further multiple expansion is limited. The market has already largely “paid in advance” for future success. In 2026, according to the bank, technology is more likely to deliver market-level returns rather than serve as the primary source of alpha.

Consumer Staples and the Risk of a Value Trap

A separate warning applies to the consumer staples sector. Although many stocks appear cheap based on valuation multiples, Bank of America points to the risk of a so-called value trap.

In this case, low prices are driven not by expectations of future earnings growth, but by share prices falling faster than analysts can revise their forecasts. Pressure from rising costs, changing consumer behavior, and competition makes recovery less obvious than it may seem at first glance.

Conclusion for Investors

According to Bank of America, 2026 may be characterized by caution, selectivity, and a renewed focus on defensive and undervalued sectors.

Healthcare appears to be the foundation of a portfolio capable of weathering economic uncertainty.
Real Estate represents a bet on interest rate stabilization and recovery after a difficult period.
Technology remains important, but without illusions of fast and risk-free growth.
And “cheap” sectors require particular caution, as a low price alone is not an investment thesis.

Put simply, in 2026 the market is likely to reward discipline and patience rather than speculation. The old principle of “steady over flashy” is becoming relevant once again.