The US stock market is in a league of its own.
At the time of writing, 12 out of the top 14 companies (by market cap) are American. Google (GOOG) is the latest tech company to hit the $4 trillion mark.
US Big Techs dominate many aspects of our daily lives, from social networking to shopping to tech gadgets. Their monopolistic platforms are extremely hard to dislodge. Profits have thus grew healthily, and steadily, for a decade.
To outperform the tech-dominated US market requires one key metric: higher profit growth.
For example, European defence stocks have outperformed many US stocks in the last two years because of higher European defence spending. The whole sector is expanding rapidly and earnings are set to grow.
Rheinmetall (RHM), a German defence company, soared 10x in ten quarters.
Another example is the commodity sector. Precious metal miners are enjoying bumper profits because of higher gold and silver prices. As a result, mining stocks soared.
Fresnillo (FRES), one of the largest silver miners in the world, soared 6x in 18 months.
Back to original question: Which market will outperform US this year?
My guess are markets and sectors that are currently on (or at the start of) a cyclical upswing where profit growth outlook are upgraded.
Look at Canada (Composite Index). The cyclical upswing in commodity prices is fuelling a strong rally there.
Japan, as suggested by Darren above, may also do well. But the rally there is tempered by sharply falling Yen.
Another index – Stoxx 50 – is hitting new long-term highs. It may do well as European mega-caps start to dominate.
Looking inside the US market, there are some relative plays for 2026. The small cap sector (Russell 2000, ticker:IWM) may outperform the Magnificent 7.
