These Are the Stocks to Buy In 2026 | TCAF 225

The narrative of the stock market is shifting. After years of dominance by a select few mega-cap technology names, the data suggests a significant rotation is underway—not a market collapse, but a broadening of participation. In this detailed analysis based on insights from JC Parets, founder of Trend Labs, we explore the technical indicators pointing toward a global bull market, the resurgence of neglected sectors, and the psychological traps that even the smartest investors fall into.

From the decoupling of Bitcoin miners to the breakout in energy services, the market is signaling new leadership for the cycle ahead. Understanding these shifts requires looking past the headlines and focusing on price action, historical trends, and market breadth.

Key Takeaways

• The "Fade" Strategy: Historical data suggests that when sell-side analysts, asset managers, journalists, and economists reach a consensus, the profitable move is often the opposite.
• Global Breadth: This is no longer just a US tech story. International markets, including Europe and Japan, are hitting all-time highs, confirming a "Bull Market for Earth."
• Sector Rotation: Capital is flowing into small caps, financials, and industrials, providing valid confirmation for the broader indices.
• The Energy Opportunity: Energy stocks, particularly oil services, show strong accumulation patterns similar to historical breakouts, despite low investor ownership.
• Sentiment vs. Price: While consumer sentiment polls remain low, consumer discretionary stocks are hitting record highs, indicating that investors should watch what consumers do, not what they say.

The Psychology of Market Tops

One of the most persistent errors investors make is assuming that intelligence equates to market success. History is littered with examples of brilliant minds failing to manage risk. A prime example is Long-Term Capital Management (LTCM) in the late 1990s. This fund was run by Nobel laureates and the smartest bond traders on Wall Street, yet they collapsed due to excessive leverage and arrogance.

"To make money they didn't have and didn't need, they risked what they did have and did need. And that's foolish."

This phenomenon isn't limited to modern hedge funds. Even Isaac Newton fell victim to the South Sea Bubble in the 18th century. After exiting a trade with a 100% profit, he watched his peers continue to get rich, succumbed to FOMO (Fear Of Missing Out), re-entered at the top, and lost a fortune. The lesson remains relevant today: managing emotions and adhering to a strict process is more valuable than raw intellect.

The Four "Fade" Groups

To navigate market noise, Parets identifies four specific groups that investors should often bet against—or "fade"—particularly when their consensus is overwhelming:

1. Sell-Side Analysts: Often conflicted by investment banking relationships and career risk, leading to "herding" behavior.
2. Asset Managers: Futures positioning data frequently shows that when managers are most bearish, markets are near a bottom, and vice versa.
3. Journalists: By the time a trend reaches the cover of a mainstream magazine, the move is often in its final innings.
4. Economists: Economists often ignore real-time price action in favor of theoretical models or lagging data that may be subject to revision.

Market Breadth and Global Participation

Contrary to the narrative that the market is fragile due to concentration, technical evidence points to a robust, inclusive bull market. This is evident when looking beyond the S&P 500 and NASDAQ 100.

A "Bull Market for Earth"

While U.S. markets have performed well, international indices are confirming the trend. Emerging markets (excluding China), European indices, and Japan have all trended higher. When the vast majority of global equity markets are participating in a rally, it diminishes the likelihood of a systemic collapse. It is rare for the U.S. market to crash while the rest of the world is hitting all-time highs.

Dow Theory Confirmation

Classic Dow Theory relies on the transportation sector to confirm moves in the industrial average. Currently, we are seeing concurrent highs in:

• Industrials: Manufacturing and heavy industry stocks are pushing new boundaries.
• Transports: Airlines, trucking, and delivery services are rallying.

This dual breakout signals that the underlying economy—the movement of goods and materials—supports higher equity prices.

The Consumer Discretionary Divergence

There is a stark disconnect between consumer sentiment surveys and stock market reality. Surveys indicate historic pessimism among consumers, yet the Consumer Discretionary sector (XLY) and its equal-weight counterparts are hitting all-time highs. When actions (spending) contradict words (sentiment polls), the market invariably follows the money. Stocks like Visa, Mastercard, and major retailers are pricing in a resilient consumer, regardless of political or economic narratives.

High-Conviction Sector Opportunities

As the "Magnificent Seven" trade cools off or consolidates, capital is rotating into cyclical and value-oriented areas of the market.

Small Caps and Financials

The Russell 2000 and S&P 600 Small Cap indices have spent years building massive bases. Technical analysis dictates that "the bigger the base, the higher in space." A breakout from these multi-year consolidations could trigger a significant run for smaller companies.

Crucially, this rotation is supported by the financial sector. You cannot have a sustained bull market without the participation of banks and brokerages. Major financial institutions like Morgan Stanley and Goldman Sachs are displaying strong uptrends, driven by a revival in M&A activity, IPOs, and asset management revenues.

The Energy Supercycle

Energy remains one of the most under-owned sectors in the market, representing a tiny fraction of the S&P 500 weighting. However, the charts for oil services companies tell a bullish story. Stocks like Baker Hughes and Halliburton are breaking out from long-term bases.

This setup is reminiscent of the 2008 energy rally. If crude oil prices stabilize or rally, the operating leverage in services stocks could lead to outsized returns. The lack of widespread ownership means there is significant fuel for a squeeze if these trends persist.

Crypto and Tech: A Nuanced View

The relationship between equities and digital assets is evolving. A notable divergence has occurred between Bitcoin and proxy stocks like MicroStrategy. The ratio of MicroStrategy to Bitcoin peaked in late 2024, likely due to the introduction of options on Bitcoin ETFs, which reduced the need for investors to use proxy stocks for leverage.

Despite this, the broader technology sector remains resilient. Even as software stocks struggle, semiconductors continue to lead. In market analysis, semiconductors are often viewed as the "transports" of the technology world; as long as chip stocks are hitting highs, the broader tech sector is unlikely to face a catastrophic drawdown.

Conclusion

The prevailing evidence suggests a "K-shaped" market environment moving forward. Rather than a rising tide lifting all boats equally, or a crash sinking everything, we are likely to see distinct winners and losers. The winners appear to be shifting from the defensive and mega-cap tech names toward cyclicals, internationals, small caps, and energy.

Investors paralyzed by the fear of a bubble or waiting for a pullback may miss the structural rotation taking place. As the data shows, asset prices trend. Fighting those trends based on valuation concerns or external narratives has historically been a losing strategy. The most prudent course is to follow the strength, which currently points to a broadening global expansion.