Evercore ISI Predicts 20% S&P 500 Gain by 2026 Driven by AI

Evercore ISI's Chief Equity and Quantitative Strategist, Julian Emanuel, has made a bullish prediction for the U.S. stock market, forecasting a 20% increase in the S&P 500 index by the end of 2026. This optimistic outlook is driven by the burgeoning artificial intelligence (AI) trend, which Emanuel believes will elevate stock valuations and societal standards to unprecedented levels. The S&P 500 is expected to reach 7,750 points by the end of 2026, marking a significant rise from its closing level in late August.

Emanuel's projection is the most optimistic on Wall Street thus far, with the strategist noting that AI's impact is already evident in the market. Despite uncertainties surrounding tariffs and policies, earnings have consistently surpassed expectations, with the second quarter seeing double-digit growth and widespread positive surprises. This trend is anticipated to continue, driving the S&P 500 to new record highs.

The U.S. stock market has been on a four-month winning streak, fueled by robust corporate earnings and potential interest rate cuts. This rally has been primarily led by the technology sector, with companies like NVIDIA, Meta, and Microsoft seeing their stock prices surge by at least 20% year-to-date. Evercore ISI's strategists emphasize that AI's influence is more profound than that of the internet, with its effects already permeating various aspects of society and industry, and its applications still in the early stages of acceleration.

However, the strategists also acknowledge the significant uncertainties surrounding next year's outcomes. In an optimistic scenario, if consumer, corporate, and investor confidence is fully unleashed, the S&P 500 could reach 9,000 points. Conversely, if inflation remains high and economic growth stagnates, the index could plummet to 5,000 points. Emanuel has also raised his target for the S&P 500 by the end of 2025, predicting it will close at 6,250 points, slightly below the average strategist target of 6,370 points.