AI, profits, Fed seen as keys to US stocks in '26

S&P 500 posts third straight banner year

- LEWIS KRAUSKOPF

The US stock market has closed the books on a third straight year of double-digit percentage gains, but a fourth stellar year in 2026 may be a tall order, requiring strong earnings, a dovish Federal Reserve and strong artificial intelligence spending.

The bull market for US stocks that started in October 2022 was propelled by Al optimism, interest rate cuts and the economy continuing to grow despite fears of a recession. The gains were achieved during a roller-coaster year that saw shares dive after the Trump administration unveiled bigger-than-expected tariffs in April. The benchmark S&P 500 climbed more than 16% in 2025, after rising 23% in 2024 and 24% in 2023.

For another year of strong double-digit percentage returns, markets need “everything firing on all cylinders,” said Sam Stovall, chief investment strategist at CFRA.

“A lot of headwinds indicate to me that while we could end up with a surprisingly good year, I don't think it will be another great year,” said Mr Stovall, who has a year-end 2026 price target of 7,400, which would be up 8% from current levels.

Many market strategists foresee a strong 2026, with some S&P 500 targets equating to over 10% gains, including Deutsche Bank's target of 8,000, which is about 17% higher for the index.

EARNINGS AND AI