The transportation sector may be poised for a recovery in 2026, following nearly four years of a freight recession, with the main driver being reduced trucking capacity, BofA Securities said in a note on Friday.

Demand could also strengthen as infrastructure investment picks up, supported by the Big Beautiful Bill's benefits of bonus depreciation, about $1.4 trillion in expected spending on data centers and power supply over the next three years and lower interest rates, now at their lowest since October 2022.

The investment firm added that additional demand may come from housing and forest products.

BofA highlighted several key themes for the transportation sector looking ahead to 2026. Truckload spot rates are expected to rise on declining capacity and policy-driven demand support may bolster overall activity.

Rail is continuing to gain market share, while less-than-truckload shipping maintains steady pricing power. Brokers may face margin pressure as rates increase, freight forwarders could benefit from customs brokerage demand linked to tariffs and airfreight has improving opportunities.

The brokerage said it is increasing its exposure to cyclical transport stocks for 2026, with a focus on companies it sees as cost-conscious and leveraging AI to gain market share. The firm added that demand could strengthen as the nearly four-year freight recession comes to an end and capacity continues to be removed.

Against this backdrop, BofA upgraded FedEx (FDX), Expeditors International of Washington (EXPD) and Schneider National (SNDR) to buy, while UPS (UPS) was raised to neutral. Scorpio Tankers (STNG) was downgraded to underperform from buy.

The firm said its top transportation picks for 2026 are Knight-Swift Transportation (KNX), FedEx, and Kirby (KEX), favoring companies it sees as cost-conscious, AI-enabled share gainers.

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