The 3 Biggest Surprises of 2026

Russel Kinnel: We’re two-thirds of the way through the year, so let’s look at some of the biggest surprises of the year so far.

For me, one of the bigger surprises has been the budding bromance between tech and small value. If you look at the highest-returning funds for 2026, the list is peppered with tech funds and small-value funds. I can’t recall that ever happening before. Tech usually rallies when the market is focused on growth and innovation, and small value is in favor when investors rotate from pricey stocks or if economic growth exceeds expectations. But this year the two are having a fine time for the same reason: AI. The tech side of that is obvious, but why small value? Well, data centers that power AI need energy, a lot of it. And small-value funds have plenty of energy companies and utility companies. They also own some small semiconductor stocks that are on fire.

Another surprise surrounds the SpaceX SPCX IPO. As expected, the company went public, but some of Elon Musk’s biggest fans didn’t get the pop you might expect. Many Baron funds have owned SpaceX for years, so they got in at a much lower price than the number the company went public for. Yet, Baron Partners BPTRX and Baron Asset BARAX have middling returns. SpaceX initially surged on its IPO, but then it slumped. Meantime, Cathie Wood’s ARK [Innovation] fund ARKK is in the bottom quartile for the year. The fund got a decent allocation at the IPO, but it couldn’t buy when SpaceX was private due to the ETF structure. So, it needed the stock to surge above its IPO price. And like I said, that hasn’t happened.

Finally, we have the return of legendary value investor Chuck Bath. Bath has returned to Diamond Hill Large Cap DHLAX after things didn’t work out with his successor, Austin Hawley. Performance slumped under Hawley, and he resigned in June. The 71-year-old Bath has come out of retirement to run the fund along with Nate Palmer, who has done a fine job at Diamond Hill Long-Short DIAMX. Bath has committed to stay on the fund through 2027. It’ll be fascinating to see if he can turn the fund around.

Watch 3 Flailing Funds to Avoid for more from Russel Kinnel.