Three Wall Street brokerages have released their year-end market outlooks, all conveying a consistent bullish signal: US stocks are poised for significant gains. Oppenheimer predicts the S&P 500 will surge to 8,100 by the end of 2026, an 18% increase from last Friday's closing price. Wolfe Research expects the benchmark index to rise to 7,600, an 11% gain, while UBS forecasts the S&P 500 will climb to 7,500, up 9%.
US stocks are on track for a third consecutive year of strong performance, with the bull market originating in late 2022. Despite earlier market turbulence caused by tariff disputes now under Supreme Court review, the S&P 500 has risen nearly 17% year-to-date in 2025, recently approaching all-time highs. Loose monetary policy and the AI boom remain the primary drivers of this rally.
JPMorgan analysts noted in a September report that AI-related companies have contributed roughly 75% of the S&P 500's returns over the past two years. Despite growing concerns about an AI bubble, this trend shows no signs of abating.
**Fed's Easing Policy Provides Support** The Federal Reserve implemented rate cuts in September and October, with markets widely anticipating another cut this week. These moves further benefit equities by lowering corporate borrowing costs and sustaining elevated stock valuations. Oppenheimer highlights Fed rate cuts as a key catalyst for the S&P 500's rise.
John Stoltzfus, Oppenheimer’s chief market strategist, wrote in a client note: "Achieving our 2026 price target hinges on monetary and fiscal policies, alongside sustained innovation and earnings growth—factors already supporting stock prices and critical for next year’s profit and revenue expansion." He added that if inflation remains controlled, the Fed may cut rates "one or two more times next year."
**Strong Corporate Earnings Growth** UBS suggests robust corporate earnings growth could further propel stock prices, particularly as AI giants ramp up mergers and acquisitions. The bank projects a 14% earnings growth next year, with nearly half stemming from the increasingly AI-integrated "tech-plus" sector.
UBS strategist Sean Simonds noted: "AI adoption across industries is accelerating. While its direct impact on earnings is still unfolding, the breadth of applications, investment scale, and early operational results suggest AI will be a key differentiator for US firms in the next cycle. We expect AI-driven productivity gains to broaden profit margins from late 2026 into 2027."
**Improving Consumer Confidence** A rebound in consumer sentiment may serve as a third market pillar. Simonds observed: "While discretionary sectors face weak industry signals and fragile confidence, sentiment is improving." Wolfe Research shares this view, predicting strong consumer spending next year despite emerging softness in manufacturing.
The brokerage stated: "Stock market gains in recent years have disproportionately benefited high-end consumers, but we believe spending momentum will persist."
According to CNBC Pro’s periodic survey, Wall Street strategists' median forecast places the S&P 500 at around 7,618 by end-2026.
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