Leading Wall Street investment banks are projecting that U.S. equities will deliver another year of robust, double-digit growth in 2026. This bullish outlook persists even as some investors express nervousness over massive technology sector spending and potential overvaluations in the artificial intelligence market.
Consensus Points to Continued Bull Run
According to a survey of nine major banks conducted by the Financial Times, the benchmark S&P 500 index is expected to climb to over 7,500 points by the end of 2026. This represents an approximate 10% increase from its closing level of 6,857 on December 5, 2025. The index had previously reached an all-time high of 6,920 in October of that year.
If these forecasts prove accurate, 2026 would mark the seventh year in the past eight to see double-digit percentage gains for U.S. stocks. However, the projected rise would signify a moderation from the 16.6% surge witnessed so far in 2025 and the average returns of the last decade.
Drivers of Optimism: Policy and AI
Analysts indicate that markets have largely moved past a pullback in November 2025, which was triggered by worries about lofty AI valuations. The renewed confidence is attributed to two primary factors:
- Fiscal Stimulus: The corporate tax cuts, estimated at US$129 billion, included in President Donald Trump's "one big beautiful bill."
- Monetary Policy: The prospect of interest rate cuts by the U.S. Federal Reserve, with futures markets pricing in three to four quarter-point reductions by the end of 2026.
"There will be some bumps along the way, but we believe that the bull market is intact," stated analysts at Morgan Stanley, who have set a year-end 2026 target of 7,800 for the S&P 500. They credit the combination of "easy fiscal, monetary and regulatory policy, along with AI tailwinds."
The market has demonstrated resilience, rebounding strongly from a sharp sell-off in April 2025 following President Trump's "liberation day" tariff announcements. The recovery has been led by the mega-cap technology stocks, with Nvidia Corp. more than doubling since its April low and becoming the world's first US$5 trillion company in October.
A Range of Forecasts from Bullish to Cautious
While the overall sentiment is positive, individual bank forecasts vary significantly:
Deutsche Bank issued the most optimistic projection, calling for the S&P 500 to hit 8,000 points by end-2026—a growth rate matching 2025's performance. Chief U.S. equity strategist Binky Chadha expects strong early-year earnings and a broadening of market performance beyond the technology sector. "Everyone characterizes my forecast as bullish—I'm concerned it's not bullish enough," Chadha remarked.
On the more cautious end of the spectrum, Bank of America anticipates the index will rise to just 7,100. Their analysts warn of potential market turbulence ahead, noting that the financial benefits of massive AI spending and data centre construction have yet to fully materialize in corporate earnings. "For now investors are buying the dream," said Savita Subramanian, head of U.S. equity and quantitative strategy at BofA.
The survey also included forecasts for international markets. Analysts expect the Stoxx Europe 600 index to rise 6.4% to about 615 points, and Japan's Topix index to climb 5.6% to approximately 3,590 by the end of 2026, indicating that Wall Street is still predicted to outperform other major global equity markets.
