As 2025 draws to a close with the S&P 500 posting a 17.7% gain, Wall Street's most influential strategists are already looking ahead—and their consensus is remarkably bullish. Major investment banks are forecasting another year of double-digit returns, with some seeing the benchmark index climbing as high as 8,000 by the end of 2026.

The Numbers Wall Street Is Banking On

The average S&P 500 price target among major strategists stands at 7,629, representing an 11.6% upside from current levels. The median forecast is even more optimistic at 7,650, suggesting roughly 13% gains.

Among the most bullish calls:

  • Oppenheimer: 8,100 (the most optimistic forecast on the Street)
  • Deutsche Bank: 8,000
  • Morgan Stanley: 7,800 (forecasting a "new bull market")
  • Wells Fargo: 7,800
  • RBC Capital Markets: 7,750
  • JPMorgan and HSBC: 7,500 (with potential upside to 8,000 if the Fed cuts rates more aggressively)

What's Driving the Optimism?

Several factors are converging to support Wall Street's bullish outlook:

AI Capital Expenditures Reaching New Heights

Perhaps the most significant driver is the continued surge in artificial intelligence spending. Capital expenditures from major tech companies—including Alphabet, Amazon, Meta, Microsoft, and Oracle—are expected to approach $520 billion in 2026. This massive investment is creating ripple effects across the economy, from semiconductor manufacturers to data center operators.

Corporate Tax Relief on the Horizon

The One Big Beautiful Act, passed earlier in 2025, is projected to reduce corporate tax bills by $129 billion across 2026 and 2027. This substantial windfall should flow directly to bottom lines, boosting earnings per share across the index.

Earnings Growth Expectations

Analysts are counting on earnings to do the heavy lifting in 2026. Bank of America's Savita Subramanian projects 14% EPS growth for the S&P 500, while Morgan Stanley forecasts earnings of $317 per share—representing a 17% increase from 2025 levels.

"U.S. earnings and cash flow growth are poised to benefit from several factors, including a market-friendly policy mix, interest-rate cuts by the Federal Reserve, positive operating leverage, the re-emergence of pricing power, and AI-driven efficiency gains."

— Morgan Stanley Investment Outlook 2026

The Fed Factor

The Federal Reserve's interest rate trajectory remains crucial to the outlook. After cutting rates three times in 2025, bringing the federal funds rate to between 3.5% and 3.75%, the central bank has room to continue easing if economic conditions warrant.

JPMorgan's strategists note that their base case of 7,500 could stretch to 8,000 if the Fed cuts rates more aggressively than currently expected. With inflation moderating and the labor market showing resilience, the conditions for continued monetary support appear favorable.

Risks to Watch

Despite the bullish consensus, strategists aren't ignoring potential headwinds:

Midterm Election Volatility

2026 is a midterm election year, historically a period of elevated market volatility. CFRA's Sam Stovall cautions: "Even though we think the bull will remain intact by year-end, we project increased volatility along with a lower-than-average full-year percentage increase."

AI Bubble Concerns

Some investors worry that the artificial intelligence trade could falter, leading to a market correction or the bursting of what skeptics consider an AI bubble. The concentration of market gains in a handful of mega-cap tech stocks remains a vulnerability.

Geopolitical Uncertainty

Ongoing tensions—from the situation in Ukraine to energy market dynamics—could introduce unexpected volatility. Trade policy developments and their impact on global supply chains also bear watching.

What This Means for Investors

For those planning their 2026 investment strategy, Wall Street's bullish consensus suggests several considerations:

  • Stay invested: The consensus view supports maintaining equity exposure, particularly in U.S. markets.
  • Consider AI beneficiaries: Companies positioned to benefit from the $520 billion AI spending wave may continue to outperform.
  • Prepare for volatility: Even in a bullish scenario, expect bumpier trading in a midterm election year.
  • Diversify thoughtfully: While mega-cap tech has led recent gains, earnings growth is expected to broaden across sectors.

As Morgan Stanley puts it, the foundation for a "new bull market" is in place. Whether the S&P 500 reaches 7,500 or 8,000 will depend on how these bullish factors play out against an evolving risk landscape. But for now, Wall Street is betting that the bull run has more room to run.