After experiencing consecutive double-digit growth for three years, Wall Street has gradually reached a consensus on this year’s economic and market outlook. While most investment institutions expect the U.S. stock market to continue its upward trend in 2026, achieving a rare “fourth consecutive rise,” the momentum may slow down, and the market sentiment is turning more conservative.
According to Bloomberg’s latest survey of 21 major investment institutions, sell-side analysts expect an average increase of about 9% in the S&P 500 index for 2026. Although all surveyed institutions do not anticipate a trend reversal, there is significant divergence in the predicted target levels, reflecting market unease with high valuations.
Deutsche Bank and Oppenheimer are the most optimistic, forecasting that the S&P 500 will surpass the 8,000-point mark, with a potential upside of around 17%. On the other hand, Bank of America takes a more conservative stance, predicting the S&P 500 index to reach 7,100 points by the end of the year, representing a 3.7% increase. The most cautious estimate comes from Stifel Nicolaus, forecasting a marginal 1.3% increase to 7,000 points over the next 12 months.
LPL’s Chief Technical Strategist Adam Turnquist warns investors to be prepared. He told CNN that historical experience shows that when the S&P 500 rises by over 15% in the previous year, the following year may see an average performance of 8%, but it often accompanies volatility.
He mentioned that during those years, the S&P 500 would typically experience an initial drop of about 14% before rebounding, indicating that the upward trend is not always smooth sailing.
Despite increasing market volatility, the “fundamentals” supporting 2026 remain solid. Wall Street generally believes that corporate profit growth and AI investments will be the core drivers of the market next year.
Yardeni Research expects the overall earnings per share (EPS) of S&P 500 component companies to rise from an estimated $268 in 2025 (fourth-quarter earnings pending) to $310 in 2026, representing a 16% increase.
According to FactSet’s analyst forecasts, the average earnings growth expectation for the S&P 500 in 2026 is around 15%.
It’s worth noting that the growth momentum is shifting from a few tech giants to a broader range of companies. In November 2025, the Dow Jones Industrial Average began outperforming the Nasdaq Composite, indicating the market expansion to previously overlooked companies not solely driven by AI.
FactSet data indicates that while the “Magnificent Seven” of the stock market is expected to see earnings growth of up to 22.7% in 2026, the earnings growth expectations for the remaining 493 constituent stocks also reach a steady 9.4%.
Fundstrat’s Economic Strategist Hardika Singh told CNN that there are almost no compelling reasons to believe that the uptrend from 2025 cannot continue into next year.
JPMorgan Chase analysts stated in a report, “The U.S. is expected to continue as a global growth engine, benefiting from a resilient economy and a supercycle driven by AI, leading to record-high capital expenditures and rapid profit expansion.”
Goldman Sachs researchers also expect the U.S. stock market performance to outshine most other major economies.
At the macroeconomic level, the U.S. has shown resilience entering 2026. The Federal Reserve Bank of Atlanta’s GDP Now tool estimates the current real GDP growth rate at 3%. Although the unemployment rate has seen a slight increase in recent months, by historical standards, it remains relatively low at just 4.4%.
In situations of economic growth where most people looking for jobs can find employment, stock prices typically rise.
Additionally, tax analysts anticipate a significant wave of tax refunds and corporate incentives in 2026 due to the “Big and Beautiful Act” passed in July 2025, providing a strong stimulus to the economy.
Meanwhile, the Federal Reserve’s monetary policy has shifted to accommodative mode. Since starting an interest rate cut cycle in the second half of 2025, the market expects further rate cuts in 2026.
Terry Sandven, Chief Equity Strategist at Bank of America Asset Management, stated, “Moderate inflation, downward trending interest rates, and upward profit trends – this is the ‘Goldilocks’ scenario for stocks.”
“Goldilocks” is derived from the British fairy tale “Goldilocks and the Three Bears,” where the girl chooses porridge that is not too hot, not too cold, but just right. Economically, it describes moderate growth with low inflation and low unemployment rates, favorable for financial market development.
However, not all analyses paint a rosy picture of the future.
JPMorgan’s Global Research Department warned of a 35% high probability of a recession in the U.S. in 2026 as a result of “sticky inflation” and a slowdown in the labor market.
Moreover, Ernst & Young issued a caution that the U.S. is entering a significant K-shaped economy.
Ernst & Young’s recent report pointed out, “High-income households will continue to drive spending, while low-income households will be pressured due to rising prices, slowing wage and employment growth, and high borrowing costs.”
Combining viewpoints from multiple institutions and experts, Wall Street’s current outlook for 2026 is not merely optimistic but more of a “cautious bullishness” built upon corporate profits, AI investments, and economic resilience. In essence, the market remains positive about the U.S. stock market in 2026, but the expected index returns are projected to be lower than in 2025. As the bullish market sentiment spreads to more sectors, market performance may become more diversified.
For investors, the keyword for 2026 will be “risk management.” Market trends will rely more on fundamental support and remain highly sensitive to policy and macro variables.