The Dow Jones Industrial Average closed above 50,000 for the first time, marking a historic milestone that comes as leadership within equities continues to shift. While headline indices remain near record levels, gains are becoming increasingly uneven across sectors.
BNN Bloomberg spoke with Brian Szytel, co-chief investment officer at The Bahnsen Group, about the rotation away from growth stocks, valuation pressures in technology, and why income-focused strategies are gaining appeal.
Key Takeaways
- Market leadership has narrowed, with value-oriented sectors and small-cap stocks outperforming growth-heavy benchmarks year to date.
- Elevated valuations in technology have driven a rotation toward more reasonably priced areas of the market.
- Software stocks have sold off sharply on AI disruption fears, creating selective opportunities after a major earnings multiple reset.
- Massive investment in AI infrastructure has raised questions about long-term returns and what is already priced into valuations.
- Dividend-paying stocks and diversified exposure across sectors may offer better risk-adjusted returns as momentum fades.
Read the full transcript below:
ANDREW: The Dow Jones Industrial Average closed above 50,000 for the first time ever on Friday. The Dow, of course, is sometimes seen as a second-string benchmark, given its price-weighted construction and relatively small number of stocks. But let’s get more on that milestone and the latest developments. We’re joined by Brian Szytel, co-chief investment officer at The Bahnsen Group. Thanks very much for joining us.
BRIAN: Thank you.
ANDREW: I think at one time, when people used to phone their brokers, they’d ask, “How’s the Dow?” You don’t really hear that much anymore. These days it’s mostly the S&P 500 and the Nasdaq.
BRIAN: That’s true. The Dow is a price-weighted index, while the S&P is cap-weighted and has 500 names, so it’s a broader benchmark. That said, the S&P has become quite overvalued in the technology sector. It’s now about 40 per cent in tech and communication services. Because of that, the Dow is actually still a good barometer of what the underlying economy is doing.
ANDREW: That’s interesting. We sometimes forget it’s not just railroads and steel companies anymore. It has kept up with the modern economy by adding technology stocks.
BRIAN: That’s right. What we’ve seen in 2026 year to date is a continued rotation away from some of those tech-heavy parts of the market toward more value-oriented components. As a result, the Dow has actually outperformed the S&P 500 by a wide margin so far this year. I don’t think we’re in the ninth inning of that move — it’s probably closer to the first or second inning as we move through the rest of the year.
ANDREW: What’s your view on the broader picture? There’s clearly been a chill running through software stocks. Are you seeing value in more traditional names, like Adobe?
BRIAN: We do see value there. Software names have really gotten pummeled following Anthropic’s Claude release and concerns about how AI could disrupt business models and take market share. But if you look at software services companies, they’ve gone from roughly 35 times earnings to about 23 times earnings in a month and a half. That’s a significant reset. I don’t think those business models will be completely supplanted by AI, so there is value in the space.
ANDREW: And this fits into the broader rotation from growth to value that you’re seeing.
BRIAN: Exactly. A lot of it comes down to valuations. Tech and growth stocks were very expensive, while small caps had underperformed for a long time. That rotation is continuing to unwind in 2026, and I think it will remain an ongoing theme through the rest of the year.
ANDREW: You’ve said there’s some froth baked into markets, even though the outlook for profitability remains strong, with earnings growth and potential tax cuts.
BRIAN: Those are all bullish factors, which is why there’s a tug of war in markets right now. We have expanding PMIs and strong ISM services and manufacturing data, alongside a weakening labour market. Add in deregulation and tax refunds expected over the next few months, and there are positives and negatives pulling against each other. Ultimately, it comes down to which parts of the market are reasonably priced and which are overdone. There’s also still uncertainty around AI productivity and what the actual return on investment will be.
ANDREW: What about the hundreds of billions — potentially trillions — of dollars being invested in AI hardware and cloud infrastructure? Does that look like a bubble to you?
BRIAN: There are components that could develop into bubble-like behaviour. The big question is ROI. By almost any calculation, it takes a very long time before profits materialize relative to the amount of capital being spent. Again, it comes down to what investors are paying for these companies and what’s already priced in. The large tech firms can afford these investments, so that’s not the concern. It’s really about whether the returns justify current valuations.
ANDREW: It’s interesting to see how far this reaches. Amazon, for example, recently struck a deal tied to copper from a Rio Tinto mine in Arizona.
BRIAN: That speaks to the energy and commodity demand tied to data centre spending. AI-driven capital expenditures benefit a wide range of sectors, which is why this theme is touching much of the market. From our perspective, focusing on industrials, energy, staples and other defensive areas that haven’t participated as much offers a better way to play this expansion into 2026.
ANDREW: One name that’s caught your attention is Blackstone, a major player in alternative investments.
BRIAN: It’s a behemoth and best of breed. You’re getting about a 3.65 per cent yield, so you’re paid to own it. It’s been a case of the baby being thrown out with the bathwater, as alternative managers sold off alongside software because many finance those businesses through private credit. But Blackstone is growing distributable earnings at roughly 18 per cent a year and is trading below a market multiple. There’s value there.
ANDREW: Is some of that pressure tied to concerns about private credit?
BRIAN: I’d separate private credit from private equity. Software businesses often have high margins, but covenant structures and payment-in-kind features can add risk in private credit. That’s driven some of the weakness in alternative managers. That said, Blackstone is highly diversified across real estate, credit and private equity, and you’re getting it at a discount.
ANDREW: Brian, thanks very much for your time.
BRIAN: Thank you.
ANDREW: Brian Szytel, co-chief investment officer at The Bahnsen Group.
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This BNN Bloomberg summary and transcript of the Feb. 9, 2026 interview with Brian Szytel are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
