Bloomberg reported in late 2025 that analysts from Wall Street firms are predicting significant returns for the S&P 500 in 2026, with expectations of around 9% and the possibility of double-digit growth. This would represent the first instance since the 1990s dot-com bubble that the index achieves four straight years of double-digit returns.
The market rally is attributed to several factors, including a cooling inflation rate, the Federal Reserve's interest rate policies, sustained corporate profits, and the stock market's resilience in 2025, which defied earlier bear market predictions following investor confidence shocks from trade tensions. Analysts are also monitoring other elements such as a potential AI bubble and uncertainties surrounding presidential actions.
Federal Reserve data indicates that Americans now hold more money in stocks than ever before, with 45% of households' financial assets linked to direct and indirect stock holdings. CNN reports that this level of stock ownership has exceeded late-1990s figures, just prior to the dot-com bubble's collapse, posing a substantial risk. The broader economy is increasingly affected by stock market performance, whether positive or negative.
"It's tricky because I think there's been a great amount of uncertainty in the last five years, and particularly this year," Michael Kantrowitz, chief investment strategist at Piper Sandler & Co., told Bloomberg. "When there's a lot of uncertainty, investors are very myopic and reactive to different data points and it doesn't take much to change the opinion and consensus." Kantrowitz added that his firm has ceased issuing annual forecasts for this reason.
Despite issuing a positive outlook for 2026, Bank of America Corp.'s Savita Subramanian remains cautious, warning that a recession could trigger a 20% market decline. Manish Kabra, head of US equity strategy at Societe Generale SA, advised investors to maintain focus, stating to Bloomberg, "Just because the year is changing, you don't change your views."
While forecasts appear optimistic, analysts emphasize that the factors causing concern in recent years persist, including the risk of tech stock declines. History shows markets rarely move in straight lines, and overly positive predictions can sometimes lead to volatility or disappointment.