Wall Street Forecasts Solid Gains For 2026 Despite Rising Market Risks
Investors have enjoyed a rollercoaster ride throughout 2025 that ultimately pushed the S&P 500 to new heights. The benchmark index is on track to secure its third consecutive year of double-digit returns and market strategists believe this positive momentum will carry forward into the new year. Wall Street experts generally project that 2026 will deliver solid gains even if the explosive rallies of the recent past begin to moderate. The consensus among major financial institutions suggests the S&P 500 could climb toward the 7,500 level by next December. This optimistic outlook relies heavily on the expectation that the United States economy will remain resilient while corporate profits continue to accelerate.
The primary driver for this projected growth is a robust forecast for corporate earnings rather than expanding valuations. Analysts at FactSet Research indicate that the S&P 500 is expected to grow earnings by approximately 15 percent next year which is a significant jump from the 12 percent growth seen in 2025. Scott Chronert and the team at Citi are among the more bullish voices on the street with a year-end target of 7,700 for the index. They anticipate that the benefits of artificial intelligence will broaden beyond just the massive technology companies and begin to improve productivity across various other sectors. This rotation could help sustain the bull market even if the largest tech giants take a breather after their dominant run.
However, not everyone is convinced that the path forward will be smooth or particularly exciting. Savita Subramanian of Bank of America has issued one of the most cautious forecasts with a year-end target of 7,100 which implies very limited upside from current levels. Her team argues that while earnings might remain strong, the price investors are willing to pay for those earnings could drop. This potential contraction in price-to-earnings multiples serves as a key risk for those expecting the rally to continue in a straight line. Jay Woods of Freedom Capital Markets shares a similar sentiment and recently told financial media that he expects a boring and normal year with returns in the low single digits.
Volatility remains a significant concern for strategists as they look at the potential hurdles awaiting investors in 2026. Mark Zabicki from LPL Financial has warned that investors need to remain prepared for periodic episodes of market turbulence. The volatility could stem from a variety of factors including sudden shifts in government policy or a softening labor market. A rising unemployment rate is a specific economic risk that could force the Federal Reserve to adjust its monetary policy more aggressively than anticipated. The market must also digest the high concentration of gains in a few stocks which historically leads to increased fragility when sentiment shifts.
The debate over the longevity of the artificial intelligence trade continues to be a central theme for portfolio managers. While some experts believe the AI boom is just getting started, others fear that the massive capital expenditures by big tech companies may not yield immediate profits. This uncertainty is leading firms like Vanguard to highlight growing risks especially within the technology sector. Investors will likely need to be more selective in 2026 rather than simply buying the broad index.
We would love to hear your predictions for the stock market in 2026 so please leave your targets and thoughts in the comments.
