Chemical stocks are lacking chemistry
Perspectives from BofA Global Research’s Leading Analysts
January 16, 2026
Matt DeYoe, Senior Research Analyst, Chemicals
This year, we are focused on underappreciated and oversold growth stocks and stories.
2025 marked a year of significant valuation compression in the specialty-chemical universe. While not entirely unwarranted given a slowdown in broader sector volumes, the decline in valuation multiples was not selective. We look for growth in excess of underlying markets, especially when that’s been the case historically. We also look for companies that have faced temporary margin headwinds that could be easing. These stocks are often trading at historic discounts as they wrestle with nonrecurring inflation that leaves room for earnings and valuation upside as costs are lowered and lapped, and the industrial and construction cycle engages.
Commodity stocks are wading through a tough trough.
Commodity chemicals face another year of growing oversupply.
Key markets such as polyurethanes and polyethylene are particularly challenged as cost curves have flattened and capacity additions will outstrip demand growth over the next 2+ years.
Here we see increased risk of operating-rate compression weighing on the run times of even the lowest-cost regions. We tend to favor the chlor-alkali chain, where supply/demand trends can be more regional and capacity expansions have been limited.
Chemical companies could use a helping hand, and we see a few opportunities.
Both commodity and specialty-chemical companies continue to manage through an inconsistent industrial and consumer backdrop. Additional interest-rate cuts at the Federal Reserve could catalyze industrial and residential construction markets. Proprietary indicators also suggest an inflection in PMIs could be on the horizon as businesses adjust to the tariff backdrop and lap lower spending levels. For commodities, we watch oil markets as geopolitics remain volatile and for headlines out of China as it begins to address industrial oversupply in certain markets.
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