Wall Street is rolling out its 2026 forecasts, and the consensus is clear: strategists expect another year of gains for U.S. stocks. The average S&P 500 year-end target among major firms is 7,629—roughly 12% above current levels. The most bullish calls see the index hitting 8,000 or higher.

The Key Predictions

Here's where major Wall Street firms see the S&P 500 ending 2026:

  • Oppenheimer (John Stoltzfus): 8,100 — "Stocks remain our favorite asset class"
  • Deutsche Bank: 8,000 — Expects "mid-teens returns" driven by inflows and buybacks
  • Morgan Stanley (Mike Wilson): 7,800 — AI investment continues to drive growth
  • Yardeni Research: 7,700 — "2026 will be just another year of the Roaring 2020s"
  • JPMorgan: 7,500 baseline, with upside to 8,000 if Fed continues cutting
  • UBS: 7,500 — Tech earnings growth of ~14% remains the key driver
  • Goldman Sachs: 7,500 — S&P 500 earnings growth of 12%+ expected

The median target of 7,650 represents approximately 13% upside from current levels—another strong year, though more modest than 2025's 17% or 2024's 24% gains.

What's Driving the Bullishness

AI capital expenditures: Spending on AI infrastructure by major tech companies—Alphabet, Amazon, Meta, Microsoft, Oracle—is expected to approach $520 billion in 2026. This investment cycle continues to power earnings growth across the technology ecosystem.

Earnings growth: Goldman Sachs forecasts S&P 500 earnings growth of more than 12% in 2026. UBS sees Tech sector earnings rising 14%. Strong profits justify elevated valuations if they materialize.

Economic resilience: With the U.S. posting above-trend GDP growth and avoiding recession, the corporate earnings backdrop remains favorable.

Fed rate cuts: Even modest rate cuts in 2026 would reduce borrowing costs and support equity valuations.

The Risks

Strategists aren't blind to potential headwinds:

Elevated valuations: The S&P 500's forward price-to-earnings ratio remains stretched by historical standards. Goldman Sachs notes tensions between "sturdy global growth" and "hot valuations" that may increase volatility.

Midterm election year: 2026 is a midterm election year—historically a volatile period for markets as policy uncertainty peaks.

AI execution risk: The market is pricing in AI delivering meaningful productivity gains. If those gains don't materialize, stocks could face a reality check.

Labor market: Any significant deterioration in employment could quickly shift the outlook from "soft landing" to recession.

Sector Outlook

Technology remains the consensus overweight. The "Magnificent Seven"—Apple, Microsoft, Google, Amazon, Nvidia, Meta, and Tesla—are expected to continue driving index returns, though strategists note leadership may broaden to include other sectors.

Financials could benefit from deregulation under the Trump administration. Healthcare faces drug-pricing uncertainty but offers defensive characteristics. Industrials may struggle with tariff impacts but could benefit from reshoring trends.

What Could Go Wrong

The bear case—though not consensus—involves several scenarios:

  • AI spending bubble bursts, triggering tech selloff
  • Inflation reaccelerates, forcing Fed to pause or reverse cuts
  • Geopolitical shock (Taiwan, Middle East, Europe) roils markets
  • Credit event in private markets spills over to public equities

Most strategists assign low probability to these outcomes, but tail risks are why diversification matters.

How to Position

The consensus suggests:

  • Maintain equity exposure at or above benchmark weights
  • Favor quality growth stocks with strong earnings visibility
  • Consider diversifying beyond the Magnificent Seven into mid-caps
  • Keep some dry powder for volatility opportunities

The Bottom Line

Wall Street's 2026 forecasts point to another year of gains, though likely more modest than 2024-2025. The S&P 500 reaching 7,500-8,000 would mark the third consecutive year of strong returns—a rare feat that speaks to the durability of the AI-driven investment cycle. But with valuations elevated and risks real, investors should temper expectations and maintain diversified portfolios. The bull market isn't guaranteed, but the smart money is betting it continues.