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By George Kailas, CEO of Prospero.ai
Over the past few weeks, I’ve had the opportunity to be featured in several national finance publications, including GoBankingRates, Yahoo Finance, and AOL, discussing a timely question many investors are asking right now:
What are the worst sectors to invest in this year?
It’s not an easy question, because markets are rarely black and white. But what made these conversations important is that they highlight something we focus on every day at Prospero.ai:
The broader market can be up, while certain sectors quietly deteriorate underneath the surface.
2025 was a strong year for the major indices. The S&P 500, Nasdaq, and Dow all posted impressive gains. But sector performance has been far more uneven and heading into 2026, those divergences may become even sharper.
Below are a few key takeaways I shared in these articles, and why I believe they matter for investors positioning today.
If there is one sector that stands out as particularly vulnerable right now, it’s real estate.
In our Prospero.ai signal framework, real estate stocks scored extremely low. Averaging just 30 out of 100 in terms of upside strength.
The biggest reason is what I described as a massive refinancing wall:
Over $1.5 to $2 trillion in commercial mortgages are set to mature through 2026 and 2027.
Many of these loans were structured during the ultra low rate environment of the 2010s — often interest only, short term, and inexpensive to roll forward.
Now, those same structures are resetting at dramatically higher rates, which creates cascading pressure:
And beyond the balance sheet stress, we’re still seeing weak asset fundamentals:
Office vacancies remain elevated, and demand in several lodging markets is tepid.
This combination is why real estate continues to flash caution signals.
Energy is another sector where our signals show persistent weakness.
Energy stocks currently average 46 out of 100 in upside ranking, and profitability forecasts are softening.
One of the most important forces here is structural oversupply.
Global oil markets are increasingly expected to move into surplus by multiple million barrels per day, and price ceiling pressure could send Brent crude meaningfully lower by late 2026.
That matters because energy equities have relied heavily on cash flow driven support:
If crude prices fall, there is simply less room for those mechanisms to prop up valuations.
Consumer discretionary stocks, or consumer cyclical, are another area where risk is quietly building.
The sector is highly sensitive to consumer confidence and spending momentum.
What we’re seeing now is a slowing consumer engine:
Wage growth is cooling, savings are being drawn down, and households are leaning more heavily on credit cards.
That creates what I referred to as silent pain which is when spending doesn’t collapse overnight, but discretionary categories begin to weaken first:
That softness can quickly translate into earnings pressure across the sector.
One thing these features reinforced for me is that investors can’t rely solely on index level strength.
Even in a bullish macro year, sector level breakdowns can create meaningful underperformance.
At Prospero.ai, we don’t make calls based on headlines, instead we track:
2026 is shaping up to be a year where those underlying signals will matter more than ever.
The goal isn’t to predict doom, it’s to stay aligned with where risk is rising and where strength is actually building.
I’m grateful to have been included in these discussions, and I hope they help investors think more clearly about where not to blindly allocate capital this year.
Because sometimes, avoiding the weakest sectors is just as important as finding the strongest ones.
Stay ahead. Daily updates with 27% better returns than S&P 500 with a 54% win rate vs. S&P 500 benchmarks on close to 5,000 picks since inception in 2023.*
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