Every Wall Street analyst is predicting a stock rally in 2026

AT THE big banks and the boutique investment shops, an optimistic consensus has taken hold: The US stock market will rally in 2026 for a fourth straight year, marking the longest winning streak in nearly two decades.

There’s plenty of angst about the risks to the bull run that has pushed the S&P 500 Index up some 90 per cent since its October 2022 low.

The artificial intelligence (AI) boom could turn to bust. The economy – and the Federal Reserve’s interest-rate decisions – could defy expectations. And US President Donald Trump’s second year could bring even more unanticipated shocks than his first.

But after three years when the equity market’s rip-roaring run made a mockery of any bearish calls, sell-side strategists are marching in lockstep optimism, with the average year-end S&P 500 forecast implying another 9 per cent gain in 2026.

“The pessimists have just been wrong for so long that people are kind of tired of that shtick,” said veteran market strategist and longtime bull Ed Yardeni. He expects the S&P 500 to finish next year at 7,700, yet even he finds the lack of dissent a little concerning.

“That’s where my counter instincts come out: Things have been going my way for so long that it is kind of worrying that everyone else seems to have become optimistic,” he said. “Pessimism is on the out right now.”

The sentiment was reinforced by the market’s volatile year, when early 2025 sell-offs unleashed by DeepSeek’s potential challenge to US AI companies and Trump’s chaotic trade war threatened forecasters’ optimistic targets.

As the S&P 500 slid toward a bear market by tumbling almost 20 per cent from mid-February through early April, strategists slashed their forecasts at the fastest pace since the Covid-19 crash – only to wind up bumping them back up as stocks staged one of the swiftest comebacks since the 1950s.

That extended what has been a vexing period for market soothsayers since the pandemic, as the economy has been surprisingly resilient, even after Trump’s tariffs took aim at the globalisation that has powered it for decades.

The massive investment in AI – which has been poured into data-centre construction and high-powered computer chips – has continued to push up the five tech giants that were responsible for nearly half of the S&P 500’s advance this year.

“It’s tricky because I think there’s been a great amount of uncertainty in the last five years, and particularly this year,” said Michael Kantrowitz, chief investment strategist at Piper Sandler & Co, who dropped the practice of publishing year-end S&P 500 targets.

“When there’s a lot of uncertainty, investors are very myopic and reactive to different data points, and it doesn’t take much to change the opinion and consensus.”

If the Wall Street forecasters are correct in 2026, however, stocks are heading for their longest stretch of annual gains since the lead-up to the global financial crisis. The highest targets among the cohort, if they materialise, would also mark the first time the S&P 500 has seen four years of double-digit returns since the dotcom bubble of the 1990s.

Christopher Harvey, a long-time strategist who moved to CIBC Capital Markets from Wells Fargo Securities, was one of the few prognosticators who stuck to his guns through this year’s volatility.

He expects the benchmark to end 2026 at 7,450, implying an approximately 8 per cent gain. But he said that “people are sleeping on a lot of macro risks”.

Among them: the possibility that the Fed will hold interest rates steady for longer than traders are currently expecting; a push by the US to raise tariffs on Canada or Mexico; and corporate executives who may try to manage earnings expectations down after what has been a solid run. 

“That could begin to upset the apple cart,” he said.

Like virtually everyone else, the analysts at JPMorgan Chase were surprised by the turmoil that swept through stocks early this year.

By April, when Trump’s trade war rocked markets, they abandoned the positive outlook they had heading into 2025. They became the most bearish among the strategists tracked by Bloomberg, predicting the S&P 500 would end 2025 down 12 per cent. 

In June, the bank ditched its pessimistic view to predict small gains. But even that forecast proved too conservative, with the S&P 500 ultimately rallying nearly 18 per cent. 

For 2026, JPMorgan has given up on its cautious stance, anticipating that the S&P 500 will rise to 7,500 on the back of solid corporate earnings and lower interest rates. 

Mislav Matejka, JPMorgan’s head of global and European equity strategy, said the optimism is also underpinned by resilient growth, cooling inflation and wagers that the surge in AI stocks reflects a potential economic transformation – not a bubble that will burst.

“If the economy is weaker than we project, the equity market may not necessarily take it negatively,” he said. “It’ll rely on the Fed to do the heavy lifting.”

While there are no doomsday predictions for US equities, Bank of America’s Savita Subramanian is among the few advocating some caution.

She says the benchmark will rise to 7,100 in 2026, limited by lofty valuations.

But the breadth of her bull-and-bear scenarios reflect the degree of uncertainty. She says a recession could send stocks tumbling 20 per cent. On the other hand, she sees the possibility that significantly higher-than-expected earnings could push them up as much as 25 per cent. 

For now, strategists seem to be leaning into a lesson learnt the hard way over the past few years: Don’t underestimate the strength of the US stock market. 

The fundamentals are supporting that view. The US economy expanded in the third quarter at the fastest pace in two years, bolstered by resilient consumer and business spending and calmer trade policies. And corporate America is projected to post double-digit earnings growth again.

“Just because the year is changing, you don’t change your views,” said Manish Kabra, head of US equity strategy at Societe Generale.

“The profit outlook is strong and broadening beyond tech,” he added, while also flagging the economic stimulus from the Fed’s rate cuts and Trump’s tax-cut bill. “The macro set up is simply solid.” BLOOMBERG