Summary
- The Piotroski-Graham value portfolio continues to outperform the S&P 500 since 2018, with a 2025 return of +40.5% and no negative years.
- Fed policy shifts—lower rates and renewed balance sheet expansion—signal a bullish environment for value stocks and broader market participation in 2026.
- Historical patterns suggest lagging DJIA and value sectors are poised for recovery as monetary easing returns and fiscal stimulus increases.
- Sector rotations and algorithmic models highlight opportunities in consumer cyclical, energy, and basic materials, with proven winners likely to return next year.
- The new value stocks will be out this week, but here is where you will likely find them hiding including some stocks that could be selected again.
Introduction
“Timing, perseverance, and 10 years of trying will eventually make you look like an overnight success.” ― Biz Stone, co-founder of Twitter.
Timing matters, and it matters greatly. I have spent the last 35 years trading, researching, and constructing algorithms to identify and leverage the value across fundamental, technical, and behavioral finance models. Of the ten portfolio models designed for optimal portfolio mixes for members to beat the market at Value & Momentum Breakouts, eight come from enhancing well-tested anomaly research in published financial journals. All of the models continue to outperform the S&P 500 in live forward testing here on Seeking Alpha, and again this year.
Finding Value in a Market Poised for New Leadership
This article builds on my prior 2026 outlook articles with a more focused look at one of our top models from published financial literature that I have found to consistently outperform in good and bad seasons.
- Chasing Bubbles And Riding Value In Another Year Leading The S&P 500
- Rotations Continue To The Next Rally As Markets Anticipate The January Effect
I am a strong advocate for leveraging the strengths of different fields of financial analysis, from fundamental to technical to a wide variety of behavioral variables. These approaches each can deliver successful model portfolios, as documented through our live trading on Seeking Alpha the last 9 years.
The thing to consider is that we rarely ever see market leaders from the prior year be market leaders for the coming year. ~ JD Henning, January Podcast
Somewhere over the past decades of trading and researching the markets, I discarded the notion of being a pure buy-and-hold investor. People may do well in buy-and-hold approaches, but they invariably have to ride through some major downturns to arrive with good results in the end. Back in the days when I relied on well-known investment firms for advice, I often received more coaching about my patience than any valuable insight about market behavior. Like many of you, my cynicism and curiosity about the financial markets led me to test, experiment, and run studies across thousands of different trading approaches, algorithms, and models. The long-term development of my momentum gauge algorithms for market and sector trading signals is one of the key reasons I am no longer a “buy/hold and hope for the best” investor.
Here’s a 10-minute view of some key factors to consider for next year. Focus is on leveraging our value portfolio from a wide variety of top-performing models available in our Seeking Alpha Investment Group.
New Fed Chair, Lower rates, and a $40 billion ‘not’ QE
One of the most important factors for market direction is the monetary policy of the Federal Reserve. No forecast of a coming year is complete without consideration of both the fiscal and monetary goals of the key policy drivers. We already know that the Trump administration intends to significantly lower taxes across the board in a loosening of fiscal tax policies. Historically, lower taxes increase the savings rate and are stimulative for markets. We know that major deregulation across U.S. industries has already begun even as tariffs increase to the highest levels in many years.
What is new for 2026 is a heightened emphasis on changing the monetary policies of the Federal Reserve and even replacing Fed Chairman Jerome Powell. The betting markets see a 92% probability that Trump will announce his new Fed chairman before February 1st.
