Looking for winning stocks in 2026

Value and momentum tell the tale

This year has proven that equity markets, while volatile, can ignore virtually any external shocks provided liquidity conditions remain favourable. That includes President Trump’s Liberation Day tariffs in April, the continued conflicts in Ukraine and Gaza, and worries over the sustainability of the Artificial Intelligence (AI) boom.

Falling short-term interest rates have buoyed most asset classes. They’re down between 125 and 250 basis points over the last year, to 2.25% in Canada, 4% in the U.S., and 2.15% in the Eurozone.

Despite the dominance of the so-called Magnificent Seven large-capitalization technology stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), the technology dominated Nasdaq 100 is up 16.8% over the last 12 months. That lags other non-U.S. indexes, with the MSCI Germany ETF up 26%, the MSCI Europe 350 up 23.2%, the MSCI Emerging Markets up 22.7%, and the U.K. and Japan both up 20.3%.

Even the S&P/TSX 60 is up 17%, besting the Nasdaq, while the S&P 500 lags, with a gain of 11.1%. The Canadian indexes’ large weight in energy has been a drag, with the S&P/TSX Capped Energy ETF up only 6.3% as oil has fallen from over US$70 a barrel to under US$60 over the last 12 months. Canada’s exposure to precious metals, on the other hand, has been a help, as the price of gold has risen over 50%, unlike its digital rival, bitcoin, whose recent plunge has left it flat over the year.

In addition, the U.S. dollar has fallen against other major currencies, down over 12% against the euro, and close to 10% against the pound sterling, even with the economic and political issues in the UK. Only the Japanese yen remains as weak as the dollar, with the yen weakening from ¥150 to ¥156 over the last year, having strengthened to ¥140 around the Liberation Day tariffs. This reflects the likelihood of fiscal stimulus by the new administration of Japan’s first female prime minister, Sanae Takaichi.

Of course, a weaker dollar is part of the Trump administration’s policy to make U.S. exports more competitive and reduce the cost of more expensive imports, even before the effect of imposing tariffs. The administration seems to have finally realized that these higher import prices are hitting its natural supporters hard with food price inflation cited as a major factor in Democratic victories in the off-year November elections. Mr. Trump responded with recent deals to cut tariffs on agricultural products from Latin American countries.

The one asset class that ironically has not notably benefited from lower short-term interest rates has been longer-term bonds. The benchmark U.S. 10-year Treasury bond yield is down only 0.3 of a percentage point (to 4%), against the 0.5 percentage point fall in the Fed Funds rate. The 10-year Government of Canada bond yield is down only 0.25 percentage point (to 3.2%), while short term rates are off over 1%. The iShares Core Canadian Bond ETF is up only 2% over the last 12 months, and the iShares Core Long Term Canadian Bond ETF is actually down slightly, in both cases before taking income into account.

This reflects investors’ concerns over growing government debt, with both the U.S., with Mr. Trump’s One Big Beautiful (Budget) Bill and Canada, where Prime Minister Carney’s recent budget substantially raised the forecast deficit for this year and expanded government deficits for the foreseeable future, some of which is driven by the need to rebuild military spending in a more uncertain world.

Top picks for 2026

When selecting three top picks for the forthcoming year, it makes sense to look at both what has underperformed for the last year and what has done well. Two of the strongest predictors of future performance are the continuance of price increases (momentum) and the recovery of assets that have become undervalued relative to their previous history (value).

In the former camp, precious metals and materials stocks stand to continue to benefit from the concerns over government deficits and higher-than-anticipated inflation.

Senior managements in the mining industry’s global giants seem convinced that the boom in AI expenditures as well as the continued electrification of the auto industry will result in much higher demand for a number of strategic metals, especially copper. For example, the recent second abortive approach by Australian-headquartered BHP, the largest copper miner in the world, for diversified U.K.-listed miner Anglo American in an attempt to pre-empt Anglo’s agreed merger with the largest Canadian base metals company, Teck, illustrates their high conviction outlook for strategic metals.

With new mines taking up to 10 years to come into production, quite apart from the increased geopolitical risks involved in certain jurisdictions, long life resources in politically stable countries are evidently regarded as more attractive than ever. First Quantum Minerals Ltd. (TSX: FM) is an excellent way to play this theme. As a bonus, it seems that its enormous Cobre Panama copper mine, shut down two years ago for political reasons by the previous administration in Panama, may possibly reopen.

In the value camp, while some interest-sensitive sectors, such as the financials and utilities, have benefited from falling rates, the iShares Capped REIT ETF is actually down 2%. Certain sectors, such as office properties, are still suffering from a post-Covid lag in transition from remote to office work. But other sectors, such as residential and food-anchored retail, are enjoying strong operating performance but still trade at discounts to their net asset value. Canadian Apartment REIT (TSX: CAR.UN) has simplified its portfolio by disposing of most of its European apartments and many older apartment buildings in Canada.

Lastly, many conventional oil and gas companies are generating enormous amounts of cash even at today’s lower prices. They’re returning much of it to shareholders either by paying sustainable dividends or by buying back stock at very attractive valuations. Canadian Natural Resources (TSX: CNQ) has successfully grown its resources by buying stakes in its existing Canadian oilsands fields from international operators disposing of what for them are not significant assets at attractive prices.

Gavin Graham is a veteran financial analyst, money manager, formerly Chief Investment Officer of BMO Financial, and a specialist in international investing, with over 35 years’ experience in global investment management. He is currently Chief Investment Officer of Calgary-based Spire Wealth Management.

Notes and Disclaimer

Content copyright © 2025 by Gavin Graham. This is an edited version of an article that first appeared in The Internet Wealth Builder newsletter. Used with permission.

The commentaries contained herein are provided as a general source of information, and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.

The views expressed in this post are those of the author. Equity investments are subject to risk, including risk of loss. No guarantee of performance is made or implied. The foregoing is for general information purposes only. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

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