Three contrarian investing ideas for a new market

Until recently, the winning strategy was clear: buy and hold tech. Over the last decade, no other sector has earned the  top performing spot as often as this one. Today, this trend is in question. On a YTD basis, tech is not even in the top five best performing sectors .

Sure, mean reversion could take hold and put tech back in the lead. But forward-thinking investors are considering new allocations that could benefit if a reversal doesn’t happen. In fact, some non-tech investments could work even if tech reclaims the top spot.

Today, we’ll take a look at areas investors have ignored that could present serious growth.

What happened in the markets this week?

🛢️ US eases Venezuelan oil sales to Cuba amid regional pressure (Al Jazeera)

• What happened: The US Treasury said it would authorise companies to seek licences to resell Venezuelan oil to Cuba for commercial and humanitarian use. This comes after months of fuel shortages in Cuba linked to US pressure on Venezuelan oil exports and growing concern among Caribbean leaders about regional instability.
• How it impacts investors: Any shift in sanctions policy can ripple through energy markets, even if volumes are modest. Investors in oil producers and refiners should watch whether this signals broader adjustments in US-Venezuela policy or remains a targeted humanitarian exception.
• Next steps: Want to understand why oil prices haven’t reacted more sharply? Read our full analysis.

🎬 Netflix walks away from Warner Bros bid as Paramount wins ( Reuters )

• What happened : Paramount Skydance’s revised $31/share offer for Warner Bros. Discovery was deemed superior to Netflix’s $27.75 bid, prompting Netflix to walk away from the deal. Netflix shares rose 10% in extended trading following the decision.
• How it impacts investors : Netflix’s disciplined approach was rewarded by the market, suggesting investors favor capital allocation restraint over empire-building. The proposed Paramount-Warner merger, if approved, could reshape the competitive landscape in streaming and media.
• Next steps : Explore our Entertainment and Media screener to see how other streaming and studio players compare on growth and valuation.

🛒 Amazon overtakes Walmart as annual revenue leader amid AI push (CNBC)

• What happened: Amazon reported annual revenue of $716.9 billion, surpassing Walmart’s $713.2 billion. Both companies are ramping up AI efforts, with Amazon boosting AI infrastructure spending and Walmart leaning on partnerships and in-house tools like Sparky.
• How it impacts investors: The retail rivalry is increasingly about tech and AI, not just store sales. Investors should watch how AI spending translates into margins and long-term growth, especially as Amazon’s heavy capital expenditure draws scrutiny.
• Next steps: Compare Amazon and  Walmart’s growth, margins, and future outlook side by side.

💳 Block slashes workforce by nearly half as shares jump 24% ( CNBC )

• What happened: Block said it is laying off over 4,000 employees, reducing its headcount from over 10,000. The company reported quarterly results in line with estimates and forecast full-year adjusted EPS of $3.66, above expectations, sending shares up more than 24% in extended trading.
• How it impacts investors: The sharp rally suggests markets are rewarding aggressive cost cuts and AI-driven efficiency. But restructuring charges of up to $500 million means investors should weigh short-term margin gains against long-term growth.
• Next steps: Review Block’s earnings trends, valuation, and risk profile before making any decisions.

🧠 Nvidia beats on earnings as data center revenue surges 75% ( CNBC )

• What happened: Nvidia reported adjusted EPS of $1.62 on revenue of $68.13 billion, both above estimates, with data center revenue climbing 75% YoY. The company also guided Q1revenue to $78 billion, ahead of expectations, without assuming data center revenue from China in its forecast.
• How it impacts investors: The AI spending cycle remains firmly intact, with hyperscalers continuing to drive demand. However, high expectations and supply constraints, particularly in gaming, keep the stock sensitive to any signs of slowing momentum.
• • Next steps: Dig into Nvidia’s valuation, growth forecasts, and risk checks to see how the numbers stack up.

💸 Traditional office REITs are looking cheap with the potential for upside

COVID delivered a serious blow to office real estate but it wasn’t a knockout.

As recently as last year, U.S. office REITs generated a disappointing -14% return . Elevated interest rates and a high cost of capital weighed on valuations, leaving many office REITs trading below book value . Investors questioned not only near-term earnings power, but also the long-term relevance of the asset class.

Now, the tone is beginning to shift.

In the third quarter of 2025, several office REITs reported their strongest leasing volumes since 2019. After 12 consecutive quarters of negative absorption, (when the total amount of space vacated by tenants rises above the amount of new space leased) U.S. office demand has turned positive for two straight quarters .

That change matters. Sustained positive absorption shows that tenants are expanding footprints again, an early but important step toward stabilizing occupancy and rent growth.

Industry observers are taking note. As Ronald Kamdem, Head of U.S. REITs and Commercial Real Estate Research at Morgan Stanley, recently explained , leasing momentum in 2025 has positioned the sector to potentially deliver measurable financial and earnings growth in 2026 and 2027. These are the kinds of results the market has been waiting to see.

At the same time, employees are gradually returning to offices, supporting utilization rates and reinforcing demand for high-quality space. Data from Cushman & Wakefield further illustrate the scale of this shift:

• Absorption was positive for the year in 50 U.S. markets, up from 33 markets in 2024
• In another 14 markets demand was negative for the year but turned positive in Q4 2025
• The overall national vacancy rate finished 2025 at the smallest year-over-year (YOY) increase in five-and-a-half years

These developments are beginning to translate into real opportunity.

Anthony Paolone, Co-Head of U.S. Real Estate Stock Research at J.P. Morgan, recently noted that vacancy rates are expected to peak in late 2025 or early 2026. If that timeline holds, the market’s inflection point becomes clearer: once vacancies crest, improving fundamentals should follow, making the recovery more visible to investors.

Demand trends are also improving at the tenant level. Research from CBRE indicates that 67% of occupiers expect to maintain or expand their office footprint over the next three years. At the same time, contraction plans are fading.

The share of companies expecting to reduce space has steadily declined from a peak of 53% in 2023 to 33% today. In other words, the wave of downsizing that defined the post-pandemic period appears to be moderating.

Read more of our insights on REITs here .

🔥 How to put US REITs to work in your portfolio

Investors looking to play the U.S. Office REIT sector should be selective about the sub-markets they choose. The recovery is uneven across geographies and asset quality. As Kamdem has observed, certain submarkets such as Manhattan are already exhibiting pricing power and rent growth. Others are burdened by older Class B and Class C inventory that struggles to compete with modern Class A properties.

For investors seeking exposure to U.S. office REITs, focusing on high-quality assets in stronger submarkets may offer the best risk-reward profile. Companies like Kilroy Realty, a leading publicly traded owner and operator of Class A office properties, exemplify the type of positioning that could benefit most from a gradual but durable recovery.

💰 Small caps catch up, and then some

Small caps are now out of favor. In January, small-cap ETFs experienced $4.7 billion in outflows . In fact, investors have withdrawn over $12 billion from small-cap ETFs over the past 12 months. For now, the market seems unimpressed with small-caps. But that assessment might be misguided.

Consider that today the S&P 500 trades at about 23x earnings , well above its 10-year median. At the same time, the small-caps, as measured by the S&P 600, trade at 15.5-16x which is just below its long-term median. Additional data from State Street shows that some key historical tailwinds for small cap performance have formed:

• Tight high yield spreads: Signaling healthy credit markets
• A steeper yield curve: Suggesting improving growth and easier financial conditions
• A weaker dollar: Representing looser liquidity

Other changes are equally supportive of small-caps. For example, the One Big Beautiful Bill Act (OBBBA) restores the deductibility of interest expense based on EBITDA rather than EBIT.

This change has a serious impact on small-caps because small companies usually have almost double the depreciation and amortization of large companies. As a result, they’re likely to benefit more from the change.

Additionally, when rates fall, an  outcome expected later this year , small caps are positioned to benefit because these companies tend to carry a higher interest expense as a percentage of debt relative to large-caps.

Simply put, small-caps are more sensitive to borrowing costs and therefore stand to benefit from falling rates more than larger companies. This contrarian trade appears to be rewarding investors already. In 2025, the  Russell Microcap was up 23.0% .

While the current set up for small caps is strong, it’s important to remember that even over the long-term, these companies have a strong history of outperformance relative to large-caps. Research shows that since 1990, small caps have had an average price-to-book ratio of 1.66 , compared to 2.59 for their large-cap counterparts suggesting a more reasonable valuation.

🚨 How to allocate small caps

Investors can use the Simply Wall St screener to find small-caps. Investors may also want to consider using small-caps as a way to increase their international exposure.

Why? Because global small-cap valuations are below long-term averages .

💻 Chinese tech stocks could be ready to rise

The US has dominated in tech in recent years. Most of the innovation and first mover advantage is found among US companies. Now China is ready to catch up.

Today, the consensus expectations for MSCI China 2026 earnings growth is 15% as the country makes impressive leaps in AI. China also is now home to more than 5,300 AI enterprises and leads the world in GenAI patenting, outnumbering the US by six times.

These are the kinds of numbers one would expect from a massive country with a state-led development model. Before the end of this quarter China will release their 15th Five-Year Plan which is expected to prioritize development of high-technology industries, and create technological self-reliance while stimulating domestic demand.

A key advantage to the Chinese approach is the efficiencies the country demonstrated with their release of DeepSeek more than a year ago. As Time reported , “a company like DeepSeek can create its V3 model for $6 million, whereas Meta has plowed tens of billions of dollars into AI with few tangible results.”

These advances are not the only reason to seriously consider Chinese tech. Investors who want to diversify away from the CapEx-intensive US tech sector while still maintaining exposure to AI can do so with Chinese companies like Tencent which trades independent of the QQQs. Other companies like Alibaba have only a little overlap in price return.

Goldman Sachs forecasts the MSCI China Index could surge roughly 20% in 2026 , with internet and hardware companies expected to report about 20% profit growth year-over-year. A lot of this upswing is expected as a result of AI monetization and AI-related capital spending.

The tech sector within the country is likely to benefit from a more accommodative policy environment which has shifted meaningfully in favor of investors. Beijing's "anti-involution" campaign, designed to curb destructive price wars between domestic companies, is expected to restore corporate profit margins across the sector.

The outperformance of the Chinese stock market is already visible based on last year's numbers.

⚡ How to gain exposure to Chinese tech

The most straightforward route is through American Depositary Receipts (ADRs), U.S.-listed shares of Chinese companies that trade on American exchanges just like domestic stocks. Many Chinese companies are accessible through standard U.S. brokerage accounts.

It's worth noting the key risks: ADR delisting threats, regulatory intervention by Beijing, U.S.-China geopolitical flare-ups, and currency fluctuations all remain real. Investors can zero in on Chinese tech stocks using the Simply Wall St screener.

💡The Insight: Value Hides in Plain Sight

Opportunity often hides where sentiment is weakest. As leadership shifts and valuations diverge, investors willing to look beyond crowded trades may find the next wave of growth before it becomes obvious.

As the market looks beyond tech, investors have a chance to allocate to overlooked assets that have promise. Simply Wall St offers an easy way to filter for these companies.

When considering traditional Office REITs , remember:

• The U.S. office REIT recovery is uneven, varying significantly by geography and asset quality, making selectivity critical for investors.

• Stronger submarkets like Manhattan are showing pricing power and rent growth, while areas dominated by older Class B and C buildings continue to struggle against modern Class A properties.

• Investors may find the most attractive risk-reward in high-quality assets within resilient submarkets, with companies well-positioned exposure to a gradual but sustainable recovery.

If you want to allocate more to small-caps , remember:

• Consider tilting towards international small-caps which have valuations below long-term averages .

To gain exposure to Chinese tech:

• Gain exposure through U.S.-listed ADRs, which trade like domestic stocks and are accessible through standard brokerage accounts.

• Remember risks like potential ADR delistings, regulatory intervention from Beijing, U.S.–China geopolitical tensions, and currency volatility; investors can screen opportunities using tools like the Simply Wall St screener.

Key Events Next Week

Wednesday

• 🇺🇸 US Consumer Price Index (February)
  • 📈 Forecast 0.3% MoM, Previous 0.2%
  • ➡️ Why it matters: Inflation remains the market’s primary catalyst. Any upside surprise could delay expected rate cuts and pressure equities.

Thursday

• 🇺🇸 US Initial Jobless Claims

  • 📈Forecast : 225K, Previous: 223K
  • ➡️ Why it matters: Claims drifting higher would suggest softening labor conditions – supportive for bonds, but a potential warning for earnings.

• 🇪🇺 ECB Policy Decision

  • 📉Forecast : 25 bps cut, Previous: 4.00% Deposit Rate
  • ➡️ Why it matters: A rate cut would underscore Europe’s weaker growth backdrop and could weigh on the euro while boosting regional equities.

Friday

• 🇺🇸 University of Michigan Consumer Sentiment (Prelim March)
  • 📈 Forecast: 77.0, Previous: 76.9
  • ➡️ Why it matters: Sentiment readings can influence expectations around consumer spending, which is still the backbone of U.S. growth.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Stella and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.