Wall Street Sees Growth: Which Cyclical Stocks Traders Are Watching

Wall Street markets are reacting positively to the latest U.S. economic data.

Unemployment in December fell to 4.4%, while the core Consumer Price Index (CPI), which excludes food and energy, rose less than expected. Additionally, according to the CME Group’s FedWatch Index, the Federal Reserve is expected to cut the benchmark interest rate twice in 2026.

Ebrahim Punawala of Bank of America describes this as a “hotly operating U.S. economy,” noting that larger tax refunds and broad credit availability could support growth this year.

Jefferies strategist Steven DeSanctis also sees signs of economic recovery and recommends that clients focus on cyclical stocks.

“Cyclical sectors are off to a strong start following the disappointing decline in 2025. 10-year Treasury yields remain stable, GDP growth is solid, commodity prices are rising, the yield curve is steepening, leading indicators are improving — all these factors support the theme, not to mention how cheap stocks in the group are,” he wrote in a client note. “We believe earnings growth will broaden and exceed the average, strengthening our case for cyclical stocks. If we are truly entering a commodities boom, cyclical stocks should perform exceptionally well.”

Jefferies highlights 14 cyclical stocks it likes for 2026. Here are five of them:

Source: Jefferies; FactSet

Among the mentioned stocks, Albemarle is the top performer, up more than 86% over the past year, driven by strong lithium demand in China.

“Lithium carbonate and hydroxide prices in China have risen around 70% since early 2025. Prices in other regions are also starting to increase… Lower interest rates and other stimuli, especially in the U.S., are likely to release pent-up demand sooner,” Jefferies notes.

Logistics giant XPO has lagged the broader market, rising 10% over the past 12 months versus 16% for the S&P 500, but Jefferies expects improvements for the company.

“While our base case forecasts a 100-basis-point improvement in [the less-than-truckload segment’s organic revenue] in 2026 to 83%, as daily tons remain 1-2% lower year-on-year, our bullish case projects OR improving 250 basis points in 2026 to just above 81%, as daily tons turn positive 2% for the year, with accelerating volume growth to 4% in 2027 and an additional 100-150 basis points improvement in OR to 80% by 2027,” the bank notes.