Choose resilience, growth, and value—stock markets have a mountain to climb

Three American stocks are highlighted by Julian Wheeler, partner and US equity specialist at Shard Capital

After the SandP 500 index has produced above-average returns for three years running, the stock market will need to climb a steep mountain if there is to be a fourth. I have concluded that the two current booms will end based on my recent observations of the market.

First off, capital expenditures related to AI will not differ from earlier bubbles driven by zeitgeist investors. Excessive capital spending caused by a supply shortage is almost always followed by a downturn once supply is satisfied. The recent collapse of CoreWeaves and the market's disbelieving reaction to OpenAI's capital expenditure (capex) and revenue forecast are just two examples for ardent AI enthusiasts: the numbers simply don't add up.

Second, another trend whose days seem to be running out is the growing demand for private credit or equity assets over their public counterparts. Such a laissez-faire approach to regulation simply won't work for a pension fund and retail audience, even though it was acceptable when the asset class was outside the mainstream.

Increased scrutiny leads to improved price discovery as well as disagreement and conflict regarding asset values, at least for some operators. These three stocks have the potential to climb the proverbial stock-market mountain in 2026 against this uncertain backdrop.

Three US stocks are facing off against Goliath.

The most dangerous direct path, straight up the north face, is taken by the expert climber. Long before his friends arrive, he will be enjoying a beer in his deckchair at the top if he doesn't fall. A £30 billion software company, MongoDB (Nasdaq: MDB) offers databases for unstructured data (like emails, phone call recordings, and social media posts that don't fit neatly into traditional databases). For sophisticated AI programs, unstructured databases are a rich source of data.

Mongo will launch an attack on Oracle, a 50-fold larger industry giant, from its £2 billion base camp. It should be able to significantly outperform the competition thanks to a new CEO and improved product.

As a well-prepared adventurer, the hiker adopts a more circumspect strategy, avoiding the more difficult sections of the ascent. My choice in this regard is Alcoa (NYSE: AA), a US aluminum manufacturer and former Dow Jones constituent.

China is reducing supply, which is improving the supply-demand balance. In addition to depending on the demand cycle, anticipate asset sales to serve as levers. What do you think goes into all those data centers?

The pathfinder avoids difficult obstacles and takes the longest, easiest route. The pharmaceutical behemoth Pfizer (NYSE: PFE) enters the picture. The stock is inexpensive because it hasn't increased since the company's Covid vaccine was introduced in 2021. While we wait to see if Pfizer's acquisition of Metsera and its obesity medication proves profitable in the long run, investors have a margin of safety built in at just 14 times earnings and a 7% dividend yield.