As the year draws to a close, Wall Street is seeing some of the boldest predictions for the US stock market in 2026, with the most optimistic being that with the development of artificial intelligence... The AI boom continues to reshape the economy and financial markets, according to S&P. The S&P 500 will surge to 8,000 points.
Deutsche Bank In its latest outlook report, Deutsche Bank set a target price of 8,000 points for the benchmark stock index by the end of 2026, and expects a return of around 15% to be achieved, driven by stronger capital inflows, buybacks and continued earnings growth that has been particularly strong so far in 2025.
According to FactSet data, earnings for S&P 500 companies grew 13.4% in the third quarter.
“By 2026, we will see strong earnings growth and stock valuations remaining high,” the Deutsche Bank equity strategy team, led by Binky Chadha, wrote in a report.
This is the most optimistic forecast to date for the US stock market next year. Other optimistic predictions include: HSBC. HSBC has set its 2026 target at 7,500 points, while JPMorgan Chase... JPMorgan predicts that if the Federal Reserve continues to cut interest rates, the S&P 500 will rise to 7,500 points, with an upside potential of 8,000 points.
Morgan Stanley Morgan Stanley also anticipates a strong year, forecasting the index to close at 7,800 points in 2026. The bank's chief U.S. equity strategist, Michael Wilson, calls it a "new bull market." In his latest report, he noted that a prolonged recession ended earlier this year, and policy support and strong earnings will continue into next year.
Opportunities and Risks
Currently, most major Wall Street banks believe that the next phase of the bull market still has room to rise.
Wells Fargo Wells Fargo also belongs to this camp, predicting a double-digit rise in the stock market over the next 12 months, with a target of 7,800 points by the end of 2026. The bank expects the stock market to experience two phases of growth next year: the first half driven by "inflation expectations," and the second half driven by a strong surge in artificial intelligence .
While Wells Fargo believes the AI boom echoes past tech-driven growth periods, it also warns that this trade could turn into a bubble. The bank believes policy and liquidity should remain favorable ahead of the midterm elections, but also notes the increasingly close link between markets and the overall economy.
“ A K-shaped economy dominated by the wealth effect means that a bear market could trigger an economic downturn that neither the Federal Reserve nor the government can afford, especially during the midterm elections,” the bank’s equity strategy team wrote. They added that as the economy diverges between the “rich” and the “poor,” the link between stock returns and household wealth is becoming increasingly close.
JPMorgan Chase holds a similar view. Their base case for 2026 is a rise to around 7500 points, but if an improved inflation outlook prompts the Federal Reserve to cut rates more aggressively, the target price could exceed 8000 points. Currently, JPMorgan Chase expects the Federal Reserve to cut rates twice more before pausing its rate cuts.
According to the CME FedWatch Tool, the market currently expects an 87.4% probability of the Federal Reserve cutting interest rates at its December meeting, far higher than the approximately 30% last week.
JPMorgan's chief equity strategist, Dubravko Lakos-Bujas, wrote: "Despite the AI bubble and valuation concerns, we believe that the current high P/E ratios correctly predict above-trend earnings growth, a surge in AI capital expenditures, increased shareholder dividends, and more accommodative fiscal policies (i.e., the 'Big and Beautiful' Act)."
“More importantly, the earnings gains associated with deregulation and AI-driven productivity growth are still underestimated,” Lakos-Bujas added, predicting earnings growth of 13% to 15% over the next two years.
However, this boom did not occur in a vacuum. Like other Wall Street giants, JPMorgan Chase points out that the transformation brought about by artificial intelligence is happening against a backdrop of a polarized economy: "This disruption is unfolding in an already unhealthy K-shaped economy, and artificial intelligence is expected to further amplify this polarization."
HSBC also favors this theme, setting a 2026 target price of 7,500 points, suggesting "another year of double-digit gains, reminiscent of the stock market boom of the late 1990s."
Like JPMorgan Chase, the bank expects the AI investment cycle to continue to support earnings, despite continued pressure on low-income consumers.
"While 2025 is characterized by 'Liberation Day tariffs,' stricter immigration policies, and policy impacts that increase overall uncertainty, ranging from trade and geopolitics to the independence of the Federal Reserve, we expect 2026 to be a year of two-speed economic and market growth," the bank added.
(Article source: CLS)
