This Overlooked Market Segment Can Surprise Investors in 2026

2025 has thrown plenty of curveballs at investors, from tariff uncertainty to potential stagflation and many risks in between. That has seen some market segments do well after years of underperformance. Meanwhile, some key players have chugged along despite dark clouds overhead, like AI-reliant mega-cap tech firms. Rather than try to predict what will stand out most in 2026, investors might consider a style adjustment, with one segment that could really help next year.

See more: Disruptive Investing Helps Communications ETF FDCF Consistently Outperform

Indeed, rather than trying to pick out a particular equities sector to spike, it may be helpful to look at market-cap weights in portfolios. Many investors, facing serious concentration risk, might benefit from diversifying into the intriguing world of midcap stocks.

FMDE & the Underrated Midcap Market Space

Mid-cap firms combine many of the strengths of both small-cap and large-cap firms, while mitigating their weaknesses. Mid-cap companies come from all kinds of industries, as well, offering those strengths within segments that best match market opportunities. In tech, mid-cap companies could provide the revenue small-caps don’t for the first few years, at potentially cheaper valuations than large-cap tech.

The right mid-cap ETF, then, could make for an intriguing consideration for investors. The Fidelity Enhanced Mid Cap ETF (FMDE) provides one option in the category that could particularly appeal. The fund charges a 23 basis point fee for its approach. Its managers actively invest in U.S. midcap stocks with assistance from Fidelity’s computer-aided quantitative analysis.

Specifically, FMDE evaluates metrics like historical valuation, growth, and profitability. Its managers can also throw in some income generation via securities lending, as well. Together, that has helped the fund return 8.5% YTD, beating both its ETF Database Category and FactSet Segment averages. FMDE has also added more than a billion in net inflows over the last one-year period, per ETF Database data.

Overall, that approach offers something different. Its active lean helps it find companies healthy enough to handle uncertainty. Looking to an uncertain 2026, with uncertainty set to rise, FMDE can appeal.

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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.

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