The central question facing investors heading into 2026 is whether market performance will finally extend beyond the handful of megacap technology companies that have dominated returns for the past three years.

“The contribution to total return of the Mag Seven has overwhelmed the other 493 companies in the market,” said Paul Baiocchi, head of fund sales and strategy at SS&C Alps Advisors, during November 11’s episode of ETF Prime. The key question is whether areas like small-caps, developed ex-U.S. equities and emerging markets will start contributing to returns.

After back-to-back years of 20%-plus returns for the S&P 500, it’s “prudent” for investors to evaluate their risks, given that technology has grown to more than 30% of the index by weight, according to Baiocchi. Technology, communication services and consumer discretionary combine to represent more than 50% of the S&P 500.

Baiocchi pointed to the Alps Electrification Infrastructure ETF (ELFY) as one way to position for market broadening. The fund launched in April and has already reached $100 million in assets by focusing on sectors like utilities, materials and energy infrastructure. Cap-weighted indexes under own those sectors, according to Baiocchi.

These “boring sectors” are positioned to benefit from the long-term electrification trend driven by data center demand and grid modernization, he said.

Moving Beyond Cash

For fixed income, Baiocchi highlighted the Alps Smith Core Plus Bond ETF (SMTH) as a key holding for 2026. The fund has grown to over $2 billion in assets in less than two years. It pulled in $850 million in inflows during 2025, according to Baiocchi.

The strategy should benefit as investors sitting in cash look for new yield sources while rates come down, he said.

Beyond market broadening, Baiocchi is watching how quickly the ETF share class structure translates to actual launches and live trading. He’s also monitoring whether private market strategies like private credit and private equity will make a “sustained push” into the ETF wrapper. However, early investor interest in available products has been underwhelming so far.

VettaFi LLC (“VettaFi”) is the index administrator and calculation agent for ELFY, for which it receives a fee. However, ELFY is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of ELFY.

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