A new report from Canaccord Genuity/Wilsons Advisory has shed light on the ASX sectors to target and avoid this year.
The 2026 Market Outlook report said S&P/ASX 200 Index (ASX: XJO) returns are somewhat constrained by the risk of RBA rate hikes.
This is in addition to elevated valuations, with the index trading on a forward P/E of 18.2x – ~1 standard deviation above its five-year average.
Here were key sectors tipped to outperform and underperform in 2026.
Image source: Getty Images
Remain overweight resources
According to the report, after a multi-year downturn, market sentiment towards the resources sector has improved materially over the past six months. This has been underpinned by broad-based strength in commodity prices.
Greg Burke, Equity Strategist in the Investment Strategy team at Wilsons Advisory said the he sees scope for a continued metal pricing upgrade cycle. This is alongside a sustained rotation into the resources sector in 2026.
This is for several key reasons:
- While macro and geopolitical risks persist, generally positive 'big picture' macro trends support expectations of moderate global economic growth and further interest rate cuts from major central banks.
- Expected USD depreciation relative to the AUD over the course of 2026, driven by a widening US-AU interest rate differential, alongside structural concerns over the US government's fiscal position.
- Energy transition, re-armament, supply chain onshoring, and AI, driving an uplift in demand for a range of 'future facing' metals and minerals.
- Gold and Silver prices to remain supported by safe-haven buying amidst ongoing geopolitical risks.
- Several key commodities – including Copper, Aluminium and Lithium – face increasingly tight supply/demand balances in 2026. This should provide support to underlying commodity prices.
Consequently, we remain positive towards the resources sector and continue to advocate for an overweight exposure. Among the major commodities.
According to the report, the preferred exposures across base metals include:
Within precious metals, the report said it remains positive towards:
Canaccord Genuity Group remains cautious towards Iron Ore given expectations of widening oversupply in 2026.
It does see value in BHP Group Ltd (ASX: BHP) as the lowest cost producer with significant copper exposure. It noted at spot prices BHP would generate more EBITDA from Copper than Iron Ore in FY26e.
Retain exposure to 'AI Winners'
The report indicated that the AI revolution is a genuine megatrend that is closer to early than late cycle.
However it did identify the risk of some 'AI impatience.'
This comes as investors scrutinise the return on capital from the acceleration in Big Tech AI CAPEX in recent years.
The next wave of AI winners is likely to emerge through the adoption and implementation of AI within companies' operations to improve productivity, alongside the embedding of AI into product suites to enhance functionality, strengthen customer value propositions and expand addressable markets.
On the ASX, this opportunity is most evident among the major software providers.
The report listed Xero Ltd (ASX: XRO) and Technology One Ltd (ASX: TNE) as AI winners.
Remain underweight banks
The report said investor interest in the banks is expected to fade.
Accordingly, we continue to advocate an underweight portfolio exposure to the sector. We expect CommBank's market leadership to erode over 2026.
Canaccord Genuity prefers ANZ Group Holdings Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) out of the big four banks.
According to the report, both have reasonable valuation support, benefit from sector-leading capital positions, and offer the most consensus earnings upside from internal 'self-help' initiatives such as technology upgrades, process simplification, and cost-out programs.
