Bank of America Predicts 8% S&P 500 Growth, 12% Earnings Increase in 2026

Bank of America predicts a solid year for the stock market in 2026, with the S&P 500 expected to rise 8% and earnings growing 12%. Strategists attribute the optimism to a 1990s-style productivity boom and investment cycle, driven by a pickup in business investment after decades of underspending. AI is seen as a bonus.

Bank of America strategists are bullish on the stock market's outlook for 2026, predicting an 8% rise in the S&P 500 and a 12% growth in corporate earnings. The optimism is driven by a 1990s-style productivity boom and investment cycle, with a pickup in business investment after decades of underspending. Artificial Intelligence (AI) is seen as an additional bonus.

The S&P 500 is expected to reach 7,200 by the end of 2026, according to Bank of America's updated price target. This prediction aligns with other Wall Street forecasts, such as Morgan Stanley's 7,200 target and Goldman Sachs' 6,900 target by mid-2026.

Corporate earnings are expected to remain robust, with S&P 500 companies poised to post "great earnings growth" of around 12% in the next year. Factors contributing to this growth include improved productivity and investment, looser monetary policy, consumer spending normalization, easing trade uncertainty, and cost-cutting measures among companies.

The rally is predicted to broaden out beyond tech stocks, with gains spreading to sectors like energy, machinery, equipment, and financials. The AI-driven rally is already showing signs of this broadening, as mega-cap tech stocks slow their momentum and other areas like small-caps pick up steam.

Despite lingering concerns about the US economy's strength, Bank of America strategists remain confident in the stock market's solid momentum heading into 2026.