The year 2026 is off to a promising start, with the S&P 500 posting its fourth consecutive year of double-digit returns. However, caution is still warranted due to elevated valuations. Despite this, the underlying setup remains decent, with earnings growth expected to reach 14 to 15 percent for the year. The U.S. Federal Reserve has room to adjust interest rates, currently ranging from 3.5 to 3.75 percent, if necessary.
## Focus on Quality and Discipline
As we head into 2026, stock selection will be more crucial than ever. Companies with pricing power, strong cash generation, and exposure to secular growth themes will be the top performers. This means being patient and disciplined in our investment approach. With valuations at current levels, index-level returns are likely to be more modest compared to the past two years.
## Top Picks for 2026
Dan Rohinton, Vice President and Portfolio Manager at iA Global Asset Management, has identified three top picks for the year: Visa, Amazon.com, and Linde.
Visa is positioned at the forefront of the global shift from cash to digital payments, with unmatched scale and network effects. The company’s exceptional margins and capital-light business model make it an attractive investment opportunity. Additionally, Visa is expanding into stablecoins and real-time payments, opening up new growth avenues.
Amazon.com, despite lagging the market in 2025, is a quality compounder at a reasonable price. The company’s Amazon Web Services reaccelerated, and there’s a massive backlog of customers waiting for capacity. The AI infrastructure investments are paying off, and retail and advertising continue to compound nicely.
Linde, which pulled back about 10 percent from its highs on soft European volumes, presents an attractive entry point. The company has a large project backlog with blue-chip customers and a sticky business model with long-term contracts and high switching costs. Linde is well-positioned for the energy transition through hydrogen and carbon capture.
## Past Picks Review
Dan Rohinton’s past picks, including UnitedHealth, Waste Connections, and Microsoft, have shown varying results. UnitedHealth saw a decline of 36 percent, while Waste Connections experienced a 2 percent growth. Microsoft, however, delivered a 14 percent return.
It’s essential to remember that past performance is not a guarantee of future results. A disciplined investment approach and focus on quality companies will be key to success in 2026.
