Wall Street Looks Past a Banner 2025 and Sets Its Sights on Another Big Year in 2026

After a powerful 2025 that saw the S&P 500 advance roughly 16–17%, Wall Street is increasingly confident that the bull market has more room to run. What stands out in recent sell-side outlooks is not just optimism, but the consistency of that optimism: many of the largest investment banks are clustering around similar assumptions for earnings growth, policy support, and index levels heading into 2026. While expectations moderate from the explosive gains of the past two years, the prevailing view is that this cycle remains intact, underpinned by resilient profits, easing financial conditions, and a gradual broadening of leadership beyond mega-cap tech.

The Core 2026 Setup: Earnings, Not Multiple Expansion

A defining theme across bank outlooks is that 2026 returns are expected to be driven primarily by earnings growth, not higher valuations. After years of multiple expansion fueled by falling rates and AI enthusiasm, strategists broadly agree that the bar is now higher. Elevated starting valuations mean fundamentals need to do the heavy lifting. Encouragingly for bulls, most houses see that happening.

Goldman Sachs frames 2026 as a “constructive” year, with 13–15% price returns driven by earnings growth in a broadening bull market. The firm argues that absent a recession, a meaningful equity drawdown remains unlikely, even with valuations above historical averages. The implication is clear: this is a market that may frustrate bears, grind higher, and reward investors who stay invested rather than time pullbacks.

Citi strikes a similar tone but adds nuance around macro evolution. Its base case envisions real GDP growth holding near 2%, unemployment drifting higher, and inflation continuing to cool—conditions that allow the Fed to cut rates by roughly 75 basis points in 2026. That easing backdrop, combined with $320 in S&P 500 earnings, supports Citi’s 7,700 target and a forward multiple near 24x. Importantly, Citi emphasizes that the bull market is entering a later phase where volatility increases, leadership rotates, and stock selection matters more.

AI Still Matters—But the Story Is Evolving

AI remains central to nearly every outlook, but the narrative is shifting. Early-cycle “enablers” drove the first leg of the rally; now strategists expect a broader diffusion of benefits. Citi, RBC, and Goldman all point to AI adopters, cyclical beneficiaries, and smaller-cap companies as increasingly important contributors to index-level returns.

Barclays takes this a step further by raising its 2026 S&P 500 target to 7,400 and boosting its FY26 EPS estimate to $305. The firm sees upside to tech earnings as mega-cap execution continues in a low-growth macro environment, while remaining cautious on ex-tech earnings due to inflation and labor-market pressure. Still, Barclays has turned positive on the broader TMT complex and sees opportunities in Financials and Utilities as rate cuts and M&A activity pick up.

JPMorgan’s outlook is among the more bullish, suggesting the S&P 500 could potentially surpass 8,000 by the end of 2026 if the Fed eases more aggressively. JPMorgan argues that high valuations are justified by accelerating AI capex, rising shareholder returns, and supportive policy dynamics, while acknowledging that rapid AI disruption could amplify volatility along the way.

Rotation, Not Reversal

Another common thread is rotation rather than regime change. RBC, for example, has grown more comfortable adding exposure to small caps and value, but stresses that sustained outperformance requires a genuine shift in earnings dynamics. The firm’s 7,750 target—derived from a blend of sentiment, valuation, and macro models—leans into a leadership transition away from mega-cap growth, while recognizing that the handoff may be uneven.

Stifel offers the most cautious framing, outlining a wide 6,500–7,500 corridor for 2026. Its bull case, centered on low-teens EPS growth and modest multiple compression, places the index near 7,500, or just over 9% upside. The bear case highlights risks tied to consumption, labor markets, and recession probability if employment weakens too quickly. Stifel’s recommendation is pragmatic: hedge concentrated Big Tech exposure with defensive growth and value rather than abandoning equities altogether.

Tom Lee of Fundstrat rounds out the bullish camp, calling for the S&P 500 to reach 7,700 in 2026 and framing the move as a classic “wall of worry” rally. Lee expects tech and AI to remain central, while Materials, Energy, and Financials play catch-up after lagging earlier in the cycle.

Where the Targets Land

Across the sell side, the center of gravity for 2026 targets is remarkably tight, clustering in the mid-to-high 7,000s:

• UBS: ~7,700, driven by 10% earnings growth and policy support

• Citi: 7,700 base case, with $320 in EPS

• Goldman Sachs: 13–15% price return, implying mid-to-high 7,000s

• RBC: 7,750, based on blended valuation and macro models

• Barclays: 7,400, with upside skew from tech earnings

• JPMorgan: 7,500 base case, with upside to 8,000 if easing accelerates

• Stifel: 6,500–7,500 corridor, emphasizing risk management

The Bottom Line

The message from Wall Street is not that 2026 will be easy—but that the bull market likely persists. Earnings growth, gradual Fed easing, and a broadening opportunity set form the backbone of the outlook, while risks center on labor markets, policy surprises, and valuation discipline. For investors, the takeaway is less about chasing another explosive year and more about staying engaged, diversifying exposure, and preparing for a market that rewards fundamentals over hype. If 2025 was about momentum, 2026 looks set to be about execution.