As 2025 draws to a close with the S&P 500 near record highs, Wall Street strategists are rolling out their 2026 forecasts—and they're bullish. The consensus points to an S&P 500 finishing next year between 7,500 and 8,000, implying 10-15% upside from current levels and a fourth consecutive year of double-digit gains.

The Forecast Range

According to the CNBC Market Strategist Survey, major Wall Street firms expect:

  • Average target: 7,629 (approximately 11.6% upside from current levels)
  • Bullish end: 8,000+ from the most optimistic forecasters
  • Conservative end: 7,200-7,400 from more cautious voices

What's Driving the Optimism

Strategists cite several factors supporting continued gains:

Earnings growth: S&P 500 earnings are projected to rise over 15% in 2026, following a 13% increase in 2025. Corporate profits remain the primary driver of stock returns.

AI momentum: The artificial intelligence buildout continues, with companies like Nvidia, Microsoft, and Amazon investing hundreds of billions in infrastructure. This spending translates to revenue for technology companies.

Economic resilience: Q3 GDP growth of 4.3% demonstrates the economy's durability despite elevated rates. A "soft landing" appears to be playing out.

Fed support: While the Fed is moving cautiously, markets expect at least two rate cuts in 2026, providing some tailwind for valuations.

The Bull Case

The most bullish forecasters—targeting 8,000 or higher—point to:

  • Potential for AI to boost productivity across the economy
  • Trump administration deregulation providing a business tailwind
  • Strong corporate balance sheets enabling buybacks and dividends
  • International investors continuing to allocate to U.S. markets

The Bear Case

More cautious strategists highlight risks including:

  • Valuation concerns: The CAPE ratio is at its second-highest level ever
  • Rate uncertainty: The Fed may not cut as much as markets hope
  • Tariff impacts: New tariffs could weigh on earnings and consumer spending
  • Concentration risk: The market's heavy reliance on a handful of mega-cap tech stocks

Historical Context

If the strategists are right, 2026 would mark an exceptional run for U.S. stocks:

  • 2023: S&P 500 +23%
  • 2024: S&P 500 +24%
  • 2025: S&P 500 +17% (through Christmas Eve)
  • 2026: +11-15% projected

Four consecutive years of strong gains would be remarkable, though not unprecedented. The market delivered similar runs in the 1990s tech boom and the 2010s recovery from the financial crisis.

Where to Invest

Strategists' sector recommendations for 2026:

  • Technology: Remains favored despite valuation concerns, driven by AI
  • Financials: Expected to benefit from deregulation and higher rates
  • Healthcare: Attractive valuations after underperformance
  • Small caps: Could outperform if the economy remains strong

What Could Go Wrong

Forecasts are just educated guesses. Major risks that could derail the bull case:

  • Recession triggered by lagged effects of tight monetary policy
  • AI disappointment if spending doesn't translate to profits
  • Geopolitical shock (conflict, trade war escalation)
  • Inflation reacceleration forcing the Fed to hike rates
  • Financial instability from the private credit boom

The Forecaster's Track Record

A word of caution: Wall Street strategists' forecasts are often wrong. Studies show strategist predictions have minimal predictive value, and targets tend to cluster around recent trends (i.e., they extrapolate the recent past).

That said, the forecasts do provide a useful gauge of professional investor sentiment and highlight key themes to watch.

The Bottom Line

Wall Street expects the bull market to continue in 2026, with S&P 500 targets ranging from 7,500 to 8,000. The thesis rests on continued earnings growth, AI momentum, and economic resilience. However, elevated valuations, rate uncertainty, and various tail risks mean investors should maintain diversified portfolios rather than betting everything on continued gains. The strategists may be right—but history suggests humility is warranted when predicting stock market returns.