Wall Street is betting on another winning year for stocks. Across 19 major investment banks and research firms, the average year-end target for the S&P 500 stands at 7,616—roughly 10% above the index's current level of 6,922. For investors weighing whether to stay invested or take profits after two consecutive years of 20%+ gains, the strategists' consensus offers important context.

The targets range widely, from cautious calls around 6,600 that would imply modest declines, to bullish forecasts above 8,000 that would deliver another exceptional year. But the central tendency suggests Wall Street expects solid, if less spectacular, returns in 2026.

What's Driving the Optimism

Several factors underpin the positive outlook:

Earnings Growth Broadening

Perhaps the most significant development is the expected broadening of corporate profit growth. For the first time since 2018, all 11 S&P 500 sectors are projected to post positive earnings growth in 2026. This represents a meaningful shift from recent years when technology giants dominated performance.

The "Magnificent Seven" tech stocks—which drove a disproportionate share of 2024 and 2025 returns—are expected to see their earnings growth premium over the rest of the market narrow from roughly 30 percentage points to single digits. That doesn't mean tech will falter, but rather that other sectors are catching up.

Federal Reserve Tailwind

Gradual monetary easing provides a supportive backdrop. While the Fed is unlikely to cut as aggressively as some hoped, the direction of policy is toward lower rates, which historically benefits equity valuations. Each quarter-point cut loosens financial conditions and reduces the discount rate applied to future corporate earnings.

Economic Resilience

The soft landing that seemed improbable 18 months ago increasingly appears achievable. GDP growth is expected to remain positive, unemployment is projected to stay below 5%, and inflation continues to moderate. This "Goldilocks" scenario—not too hot, not too cold—is precisely the environment in which stocks tend to thrive.

"We're entering the third year of a bull market that began in October 2022. Historically, third years are positive but more modest than the first two. We expect solid returns driven by earnings growth rather than multiple expansion."

— Savita Subramanian, Head of U.S. Equity Strategy at Bank of America

The Bull Case: 8,000 and Beyond

The most optimistic strategists see paths to S&P 500 levels above 8,000, which would represent another year of exceptional returns. Their arguments include:

  • AI productivity gains: Corporate investment in artificial intelligence could start translating into measurable productivity improvements, boosting profit margins across sectors
  • Faster Fed cuts: If inflation continues to cool or the labor market weakens more than expected, the Fed could accelerate its easing cycle
  • M&A revival: Lower financing costs and accumulated corporate cash could unleash a wave of mergers and acquisitions that unlocks shareholder value
  • International capital flows: Continued uncertainty in other major markets could drive additional foreign investment into U.S. equities

The Bear Case: Reasons for Caution

More cautious strategists highlight several risks that could disappoint consensus expectations:

Valuation Concerns

The S&P 500's forward price-to-earnings ratio remains elevated by historical standards. At roughly 22 times forward earnings, the market is pricing in significant profit growth. Any disappointment could trigger multiple compression.

Concentrated Leadership

Despite talk of broadening, the largest stocks still represent an outsized share of the index. The top 10 names account for roughly 35% of the S&P 500's market capitalization. A stumble by any of these giants could disproportionately impact index performance.

Policy Uncertainty

Tariff policy, fiscal trajectory, and regulatory changes could all surprise markets. The ongoing Supreme Court case over tariff authority adds a layer of uncertainty that's difficult to price.

Geopolitical Risks

Tensions in multiple regions—including the Middle East, Asia, and Eastern Europe—could escalate in ways that disrupt energy markets, supply chains, or investor confidence.

Historical Context

How does 2026 compare to historical bull market patterns? The current rally, which began in October 2022, has delivered cumulative returns of roughly 65% through early January 2026. That places it among the stronger bull markets of recent decades, though still below the exceptional gains of the 1990s technology boom.

Third years of bull markets have historically delivered positive but more modest returns—averaging roughly 10% to 12%. The strategists' 2026 targets are consistent with this pattern, suggesting continued gains at a more sustainable pace.

Investment Implications

For individual investors, the consensus outlook suggests several portfolio considerations:

  • Stay invested: Trying to time market tops is notoriously difficult, and the base case remains positive
  • Diversify beyond mega-caps: Broadening earnings growth favors exposure beyond just the largest technology stocks
  • Consider value: Sectors that have lagged, including financials, healthcare, and industrials, may offer better risk-reward profiles
  • Maintain perspective: After two years of 20%+ returns, a 10% gain would be healthy, not disappointing

The path to 7,616 won't be straight—volatility is likely as markets navigate policy shifts, earnings releases, and economic data. But Wall Street's message is clear: the bull market isn't over, even if its pace is moderating.