ShariaPortfolio Canada: 2026 could be the year of consumer cyclicals

Consumer cyclicals could be the surprise outperformer for Halal portfolios in 2026 as Shariah investment funds strive to stay ahead of their conventional peers by seeking additions to sector favorites like healthcare, technology and communication services.

While Big Tech has dominated equity markets for years, massive sector rotations within the S&P 500 since late 2025 could provide opportunities for consumer cyclicals, or companies that sell non-essential goods and services, says Irfan Chaudary the portfolio manager at Ontario-based ShariaPortfolio Canada.

Data across equities tracking services show healthcare providers, automotive manufacturers and parts suppliers, large-scale retailers and online e-commerce platforms, hotel chains, cruise lines, restaurants and high-end fashion as well as athletic wear as ideal candidates for cyclicals.

Catch-up year for cyclicals 

Irfan identifies 2026 as a "catch-up” year for high-quality cyclicals, which could see a bump-up in valuations as Big Tech stocks – particularly those in the Magnificent Seven series comprising NVIDIA, Alphabet, Microsoft, Meta, Apple, Amazon and Tesla – bleed from massive overspending on AI.

Minus the seven giants, the rest of the 493 stocks in the S&P 500 are likely to chase productivity gains from the AI adoption spread through the economy, putting consumer cyclicals especially in a sweet spot.

“Cyclicals, I think, will do well in 2026,” Irfan shared in his recent annual outlook for faith-aligned investors seeking outsized returns.

The portfolio manager’s thesis is that Wall Street’s current bull cycle favors companies with "high business quality" and clean income statements. For cyclicals, this means focusing on firms that aren't just riding a trend but have the cash flow to sustain growth as consumer spending patterns shift.

As such, investors should not be “just looking for companies that are cheap" but instead seeking “quality companies with a competitive advantage", said Irfan. This approach is the unintentional superpower of Shariah investing –which is no longer a niche performance but a leading act, says Irfan, who attributes the S&P 500 Shariah Index’s outperformance of 1% and 3% against the S&P 500 in 2024 and 2025, respectively, to a mix of ethical rigor and tactical discipline.

Consumer cyclicals were also a "natural fit" for Shariah investors as they represent industries that typically do not rely on interest generation. And as the Federal Reserve looks set to keep up with the rate easing cycle it began last year, consumer cyclicals will be poised for outperformance, making them ideal strategic "overweights" in Shariah portfolios, adds Irfan.

Cautious optimism on gold

Outside of stocks, gold will likely remain a major attraction for Shariah investors in 2026, says Irfan, who offers a "cautiously optimistic" outlook on this after the tripling of gold prices the past two years, driven largely by global central banks wanting to diversify their dollar reserves.  

Irfan’s concern is particularly over the "retail frenzy" in gold that pushed the yellow metal to record highs of US$5,600 an ounce on the 29^th January 2026, only for it to plunge 11% the next day. The portfolio manager says investors should avoid chasing all-time highs in precious metals and await more favorable entry points. “Technical corrections... will give us an opportunity to build the positions.”