Beyond the Santa Claus Rally—5 Quality Stocks to Buy in 2026

Market Overview - Investors were disappointed with the anticipated Santa Claus rally, as markets declined after a brief rise on December 26, heading into 2026 [2] - The overall setup for stocks appears bullish for 2026, with major indexes near record highs despite a challenging macroeconomic environment [3] Valuation Insights - U.S. equities are trading at approximately a 3% discount to intrinsic value, according to Morningstar's December 2025 fair-value analysis [3] - Analyst targets have increased faster than stock prices in the last two months of 2025, driven by expectations of strong earnings in 2026 [3] Company Focus: Microsoft - Microsoft Corp. (NASDAQ: MSFT) ended 2025 with a 14.7% gain, slightly below the S&P 500, positioning it as a market laggard [4] - The company is investing billions in AI infrastructure, raising investor skepticism about the timing of returns; however, its capital expenditure is well-supported by a strong balance sheet [5] - Analysts project over 12% earnings growth for Microsoft in 2026, supported by a strong competitive position that makes switching costs high for customers [5] - Following a 6.9% decline in Q4 2025, MSFT stock is trading about 30% below its consensus price target, presenting a potential buying opportunity for long-term investors [6] Stock Recommendations - Five high-quality large-cap stocks are identified as having potential catalysts for growth in 2026, benefiting from lower rates, earnings acceleration, and economic normalization [7]