Why Relative Price Strength Matters More Heading Into 2026

Core Viewpoint - U.S. stocks are starting the new year with strong momentum, driven by easing inflation, improving growth expectations, and positive earnings forecasts, particularly influenced by advancements in artificial intelligence [2][3] Market Overview - The stock market has experienced volatility due to trade concerns, policy uncertainty, and changing interest rate expectations, but has shown resilience with cooling inflation and better-than-expected earnings [3] - Heavy investments in AI, data centers, and cloud infrastructure are providing a strong underlying support for the market [3] Investment Strategy - A relative price strength strategy is recommended, focusing on stocks that are outperforming the market, as they are likely to continue their upward trend [4] - Stocks such as Jabil Inc. (JBL), Ciena Corporation (CIEN), Commercial Metals Company (CMC), and Plains All American Pipeline LP (PAA) are highlighted as potential investment opportunities [4] Stock Screening Parameters - Stocks should be evaluated based on their earnings, valuation ratios, and relative price performance compared to peers and industry averages [5][6] - Stocks that outperform their respective industries or benchmarks are more likely to yield significant returns [6] - A focus on stocks with positive earnings revisions and strong fundamentals is essential for identifying growth potential [7][8] Featured Stocks - Jabil Inc. (JBL): Market cap over $25 billion, expected EPS growth of 18.5% year-over-year for fiscal 2026, shares up 58% in a year [12] - Ciena Corporation (CIEN): Expected EPS growth rate of 41.8% over three to five years, shares up 191.2% in a year, with a fiscal 2026 EPS estimate indicating 97.7% growth [13][14] - Commercial Metals Company (CMC): Market cap of $8 billion, expected EPS growth of 125.2% for fiscal 2026, shares up 42.4% in a year [15] - Plains All American Pipeline LP (PAA): Market cap nearly $13 billion, with a 6.8% upward revision in earnings estimates for 2026, shares up 3.6% in a year [16][17]