One Wall Street strategist is bucking the consensus and calling for stocks to move sideways in 2026.
As the “sugar high” from the past three years fades, investors should brace for a slow grind higher in 2026, said Barry Bannister, chief equity strategist at Stifel, in a report shared with MarketWatch on Tuesday. Bannister believes there is a real risk of a recession in the U.S. this year if the labor market continues to weaken — a view that puts him at odds with many of his peers at other big firms.
But even if a recession is avoided, stocks likely won’t see another year of double-digit gains, Bannister noted.
Across Wall Street, economists and investment strategists are almost universally optimistic. But the Stifel strategist said on Tuesday that he believes the “K-shaped” U.S. economy — one where wealthier consumers are responsible for most of the growth in spending — isn’t sustainable. He believes that if the labor market continues to weaken, at some point consumers will feel the pinch, threatening a key pillar of the U.S. economy.
“Amid economic optimism, we take an opposing view, believing that the ‘K-shaped’ economy … is economically unsustainable. As aggregate labor income … falls in 2026 … we expect real personal consumption (~70% of GDP) to slow,” Bannister said in written commentary.
And while Bannister expects corporate profits to see a big pickup this year — he expects 13% earnings growth for members of the S&P 500, slightly below the Wall Street consensus — any bullish impact could be offset by investors’ unwillingness to pay as much of a premium for stocks, as tighter financial conditions take their toll.
The upshot is that the S&P 500 could mostly move sideways this year. Bannister said he expects the index to either fall or rise by about 500 points — leaving a corridor of scenarios for the index between 6,500 and 7,500. The S&P 500 closed Tuesday’s trading at 6,963.74, FactSet data showed.
One popular forecast that has taken hold across Wall Street is the idea that the U.S. economy is entering a period of productivity-driven expansion. This could see GDP growth accelerate even if the labor market remains muted, helping to keep inflation subdued.
But after delving into the economic data, Bannister argued that there has so far been little evidence to support the possibility of a cyclical recovery for long-struggling corners of the U.S. economy, like manufacturing and the housing market. The Institute for Supply Management’s manufacturing purchasing managers index has continued to point to tepid activity, and durable-goods orders excluding technology also aren’t indicating a “boom” scenario, he said.
Bannister’s report arrives as the momentum driving major U.S. equity indexes like the S&P 500 and Nasdaq Composite has started to stall out. The tech-heavy Nasdaq, which outperformed other major U.S. indexes over the past three years, has gone nowhere for more than two months, having hit its most recent record high in late October, FactSet data showed.
A seemingly unstoppable rally in stocks over the past three years has helped thin the ranks of bearish strategists on Wall Street. But Bannister has established himself as one of the few stock-market skeptics still standing, at least among his peers working at major banks, asset-management firms and research shops.
The median official S&P 500 price target among leading Wall Street analysts stands at 7,500, based on outlooks collected by MarketWatch.
Over the past year, Bannister has made at least one prescient call: He anticipated both the S&P 500 correction that played out in March and April, as well as the swift rebound that followed.
U.S. stocks struggled Tuesday following the release of the latest consumer-price inflation report, with the S&P 500, Nasdaq and Dow Jones Industrial Average all closing lower, FactSet data showed.
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