Veteran investor, CIO and founder of Navellier & Associates, Louis Navellier, has warned against chasing the recent “junk rally” in low-quality stocks, urging investors to pivot back to stocks with strong earnings growth as the 2026 financial year begins.
A ‘Big Flip’ Back To Quality
In his latest Navellier Market Buzz video, Navellier argued that the fourth-quarter mean reversion—where the worst-performing stocks suddenly led the market—is unsustainable.
He believes January will mark a “big flip” where quality companies, which he defines as those with accelerating sales and earnings, will reassert their leadership.
He cited an intraday explosion in data center stocks on the first trading day of January as evidence that institutional buying pressure is already returning to this sector.
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Top Picks For Earnings Season
Navellier is positioning his portfolio ahead of what he calls “judgment day” for corporate earnings. He argues that data center demand and AI implementation will drive significant growth for specific companies.
His top pick remains Nvidia Corp. (NASDAQ:NVDA), his largest holding, which he expects to report a 66.7% increase in sales and a 71% jump in earnings, buoyed by new chip sales to China.
Beyond Nvidia, Navellier is bullish on Palantir Technologies Inc. (NASDAQ:PLTR) for its role as a top “AI implementer” for government contracts, forecasting a 64.1% earnings surge.
He also highlighted Seagate Technology Holdings PLC (NASDAQ:STX) and Celestica Inc. (NYSE:CLS) as beneficiaries of the data center boom, with earnings forecasted to rise 37.6% and 58.1%, respectively.
Macro Outlook: Deflation Is The Risk
Navellier's focus on quality is underscored by his concern over the broader economy. He predicts that deflation, not inflation, will be the primary story for 2026.
Citing falling rental costs, declining condo prices, and low energy prices, he argues that the Federal Reserve is looking in the “rearview mirror” and needs to cut rates by at least 100 basis points to avert a deeper economic slowdown.
US Benchmarks End 2025 On A Positive Note
In 2025, the S&P 500 was 16.65% higher, whereas the Nasdaq Composite and Dow Jones gained 20.54% and 13.38%, respectively.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, were higher in premarket on Monday. The SPY was up 0.24% at $684.82, while the QQQ advanced 0.52% to $616.29, according to Benzinga Pro data.
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