A bullish consensus – ranging from mild to strong gains
A number of major global brokerage firms have released their initial forecasts for the S&P 500, and most expect positive returns, albeit to varying degrees.JPMorgan expects the index to eventually reach around 7,500 by the end of 2026, which is about 10-11% higher than current levels. If interest rates develop favorably, the bank foresees a scenario in which the S&P 500 rises above 8,000 points.
HSBC’s forecast is also set at 7,500, which is a reasonable target for the end of the year given the accelerating investment in technology and the spread of the use of artificial intelligence in most walks of life.
In this context, Morgan Stanley is also optimistic and expects US equities to outperform global markets, with gains of around 14% amid a favorable macro and policy backdrop.
Even more optimistic is Oppenheimer Asset Management, which forecasts an S&P 500 level of 8,100, implying an upside of about 18% if corporate earnings and economic momentum develop as expected.
Deutsche Bank is in the same range with a target of 8,000, driven by strong earnings growth and continued AI-related ceilings.
Some strategists are more cautious. For example, Bank of America forecasts a narrow trading range of 7,100-7,200, reflecting the idea that 2026 should deliver positive but more moderate returns after the strong rallies of recent years.
Despite these differences, the broad consensus points to double-digit gains, albeit with clear caveats.
What’s behind the optimism?
The bullish expectations are supported by several structural forces at play.
That supportive mix, monetary policy easing, possible interest rate cuts, fiscal stimulus and deregulation will all help boost stock markets, Morgan Stanley notes. Still, a key driver is the AI-driven capital expenditure cycle that should dominate the stock market by 2026.
HSBC also wants to accelerate AI-related spending, spread opportunities beyond big tech and enable more sectors to benefit from productivity gains, cost efficiencies and new revenue models. Diffusion of AI-powered growth can also reduce market concentration risk.
Another positive factor is earnings growth: analysts continue to forecast increases in earnings per share over the next two years, based on continued economic activity and good demand in sectors at the forefront of technological transformation.
Also, as in previous years, US equities are expected to outperform global markets due to solid growth prospects, favorable policy environment and structural advantages.
Policy and macro tailwinds
Monetary policy will be an important driver. If the Federal Reserve continues to ease, lower borrowing costs could support valuations and investors’ risk appetite. A stable macroeconomic backdrop – moderate inflation and steady economic growth – would further strengthen earnings visibility and sentiment.
Where things can go wrong
The bullish story is not without warnings.
Analysts continue to point to the fact that valuations are already high, and any disappointment in earnings could lead to sharp corrections. A slowdown in enthusiasm for AI – or delays in adoption – could also pose a challenge to industries currently priced for perfection.
Then there are the more general risks: persistent inflation, interest rate cuts that don’t come as expected, geopolitical uncertainty, trade tensions or a sudden loss of consumer demand. Due to the high exposure to a limited number of large technology and AI-focused companies, market concentration remains at risk.
Global supply chains, policy shifts and the overall economic environment could influence the 2026 trajectory.
Expert view
Akash Hariani, Joint Managing Director at Motilal Oswal Private Wealth, believes the US enters 2026 on a solid earnings foundation, supported by the AI capex cycle, but is not without risks. Higher government bond issuance, persistent inflation in the services sector and an uneven trajectory of Fed rate cuts continue to drive volatility. Tariff-related uncertainty and changing trade dynamics remain key variables. He also says the 2026 US midterm elections under the Trump administration could bring additional tax, regulatory and geopolitical unpredictability. He proposes one approach in 2026 with selectivity, taking into account the main risks.
What it means for investors – globally and in India
For investors, 2026 offers opportunities, but also requires discipline.
That’s where diversification will come in handy, especially amid concentrated risks in technology and AI. Sector and geographic balance can help mitigate volatility.
Selective exposure to innovation-driven sectors such as AI, automation, cloud infrastructure and next-generation technology can have great potential; However, stock selection will be of utmost importance.
Profit developments should be closely monitored. High valuations require regular earnings growth.
And despite the bullish base case, investors should be prepared for higher volatility as macro conditions change.
Also read: US Fed implements third rate cut in a row. What does this mean for the Indian stock market?
In short
If the more optimistic forecasts hold, 2026 could be another year of healthy double-digit returns for U.S. stocks, driven by robust earnings, technological transformation and economic strength. But with valuations high and risks present, a balanced and diversified approach remains crucial. Essentially, 2026 looks promising, but potentially volatile. Investors who remain selective, diversified and patient may be best positioned to benefit.
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