“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.”
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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 has seen four years of double-digit returns since the dot-com bubble of the 1990s.
Christopher Harvey, longtime strategist who moved this year to CIBC Capital Markets from Wells Fargo Securities, was one of few prognosticators who stuck to his guns through this year’s volatility — anticipating that the S&P 500 would end the year at 7007 — and got it right. The index closed at about 6930 on Friday, just 1 per cent short of his estimate.
Harvey expects the benchmark to end 2026 at 7450, implying an approximately 8 per cent gain. But he said “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; or corporate executives who may try to manage earnings expectations down after what has been a solid run.
“That could begin to upset the applecart,” he said.
Like virtually everyone else, the analysts at JPMorgan 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 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 ultimately rallying nearly 18 per cent this year.
For 2026, JPMorgan has given up on its cautious stance, anticipating the S&P 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.
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“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 next year, Bank of America’s Savita Subramanian is among the few advocating some caution.
She says the benchmark will rise to 7100 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 learned 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 Société Générale.
“The profit outlook is strong and broadening beyond tech,” he said, 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
