Wall Street Outlook for US Stocks in 2026: S&P 500 target could reach as high as 8000 points with AI and policy as key variables.

As the year-end approaches, several top Wall Street investment banks have successively released their outlook on the S&P 500 Index for 2026. Despite differences in target levels, there is a general consensus that with the continued investment wave in artificial intelligence (AI), a shift towards loose monetary policy, and the expansion of earnings growth, U.S. stocks are expected to continue their upward trend. HSBC: S&P 500 Index is expected to reach 7500 points by the end of 2026 According to HSBC's market outlook report, the bank has set a target of 7500 points for the S&P 500 Index by the end of 2026. It is expected that driven by the core momentum of AI investment, the index will achieve double-digit growth for the second consecutive year. Nicole Inui, Head of Stock Strategy for HSBC Americas, stated that the earnings per share of S&P 500 Index component companies is expected to grow by 12% due to the support of "macroeconomic stability, easing policy uncertainties, and the AI investment craze." The report pointed out that the U.S. economy in 2026 will show a "dual-speed growth" pattern: the strong performance in the AI sector will offset the cautious consumer sentiment in the United States. HSBC also predicts that the U.S. Gross Domestic Product (GDP) will grow by 1.7% in 2026, slightly lower than the market's general expectation of 1.8%; while the inflation rate will rise to 3%, higher than the 2% policy target set by the Federal Reserve. Inui said, "We believe that the main themes of the market in 2026 will be similar to 2025, including the growth trend led by AI investments, the differentiation of consumer groups, and policy uncertainties." The bank expects that with the "AI arms race intensifying," related capital expenditures will continue to dominate economic activities. The AI-related spending of mega-cap companies in 2026 is expected to surpass $500 billion. This spending will benefit other industries such as utilities and industrial sectors, while potentially crowding out capital and labor supply in other areas. Additionally, HSBC warned that due to multiple factors, the divergence between high-income and low-income consumers in the U.S. will further intensify in 2026. Inui explained, "The Fed is not cutting interest rates, inflation stickiness remains high, labor market fluctuations, and reduced fiscal support or increased uncertainty all put pressure on consumers." She added that adjustments to welfare programs like food stamps (SNAP) have already affected 12% of American households. HSBC's target price for the S&P 500 Index is based on expected earnings per share of $300 (a 12% year-on-year increase), slightly lower than the market's general expectation of $305. Inui summarized, "Based on the above assumptions, we used a price-earnings ratio of 25 times the past 12 months (the average this year) to determine the target level of 7500 points for the S&P 500 Index by the end of 2026." She also warned that deteriorating labor market conditions, continued inflation, and heightened uncertainty in trade policies are key risk factors. BNP Paribas: Strong economic growth expected in 2026, S&P 500 Index target to exceed 7300 points BNP Paribas, a French Industrial Bank, predicts that the potential volatility range of the S&P 500 Index in 2026 will be higher than usual, and the policy path of the Federal Reserve is expected to have a crucial impact on the market direction. In a recent investor report, the bank pointed out that this benchmark index may reach 7300 points in the first half of 2026 and is expected to maintain this level until the end of the year. This forecast is based on an expected earnings per share of $333 in 2027, at a valuation level of around 22 times. The bank also outlined various scenario assumptions: in a bear market scenario, the index may fall to around 6700 points, while the bull market target may exceed 7700 points, reflecting the significant divergence in potential outcomes caused by uncertainties in monetary policy. BNP Paribas also expects that the Federal Reserve will implement two more rate cuts before the end of Federal Reserve Chairman Powell's term in May 2026. The bank also stated that the upcoming leadership change at the central bank is expected to boost investor sentiment. In addition to monetary policy, the bank predicts that the global economy will achieve super-trend growth in 2026. Strong fiscal support and an accelerated capital expenditure cycle (covering the technology sector and traditional industries) are seen as the core pillars of the economic outlook improvement. Barclays raises S&P 500 target price, expects it to reach 7400 points by the end of 2026 Barclays' strategists have raised their expected target for the S&P 500 Index at the end of 2026 to 7400 points, stating that despite weak macroeconomic growth, large technology stocks are performing well, and the monetary and fiscal environment is continuing to improve. Led by Venu Krishna, Barclays' stock strategy team stated in a research report that the new target is 5.7% higher than the previously set 7000 points, while the expected earnings per share for the S&P 500 Index in 2026 has been raised from $295 to $305. They believe that in a low-growth macroeconomic environment, large technology stocks will continue to operate steadily, and the competition in the AI sector shows no signs of cooling down, therefore, the profit growth in the technology industry may exceed Wall Street's general expectations. However, excluding the technology sector, the strategists warned that due to the rise in inflation levels and unemployment rates compared to this year, there may be pressure on overall economic activity and consumer spending, and the earnings per share of non-tech sectors may fall short of market consensus expectations. The report pointed out that the Fed's rate cuts will provide a valuation boost, especially for cyclical sectors and growth stocks. However, the strategists emphasized that while it is assumed that the unemployment rate will "remain within a reasonable range corresponding to the neutral rate," the biggest short-term risk is still economic deceleration. Additionally, although the "possibility of further escalation of tariffs has been largely ruled out," the strategists warned that some price pressures are "in the transmission process" and have not yet fully manifested, while consumer confidence is currently at multi-year lows. The team also cautioned that U.S. midterm election years often coincide with weaker stock market returns. UBS: AI-driven growth trend to continue, S&P 500 Index target of up to 7500 points by the end of 2026 UBS's Global Research Department released a report stating that the AI-driven uptrend in U.S. stocks is expected to continue until 2026, with the bank setting a target of 7500 points for the S&P 500 Index by the end of next year. The core logic behind this is that corporate earnings are expected to maintain strong growth, and the resilient technology sector, with high concentration but strong resilience, will continue to contribute to the increase. The European investment bank stated, "We expect earnings of S&P 500 Index component companies to grow by 14.4% over the full year of 2026. After experiencing slow growth for two quarters, earnings growth is expected to accelerate from the second quarter of next year." The report also noted that although there are concerns in the market about bubble risks and valuation pressures on AI-related stocks, such worries are expected to have a limited actual impact on the market. JP Morgan: S&P 500 Index expected to reach 7500 points by 2026, continued rate cuts by the Fed could see it break through 8000 points JPMorgan's top stock market strategy team expects 2026 to be another fruitful year for U.S. investors. The stock strategy team led by Dubravko Lakos-Bujas has set a target of 7500 points for the S&P 500 Index by the end of 2026, and stated that if the Federal Reserve continues its rate cuts, this benchmark index could surpass 8000 points in the next year. In a client report, JPMorgan stated, "Despite concerns in the market about the AI bubble and valuation pressures, we believe that the currently high price-earnings ratios accurately reflect expectations of super-trend earnings growth, the AI capital spending boom, increased shareholder returns, and expectations of loose fiscal policies (i.e., the 'Build Back Better Act')." "More importantly, the relaxation of regulations and the productivity improvements brought about by the expansion of AI have not been fully recognized by the market." The bank's prediction of the S&P 500 Index reaching 7500 points in 2026 is mainly based on an expected earnings growth rate of 13% to 15% over the next two years. In the baseline scenario assumption, JPMorgan expects the Federal Reserve to cut rates two more times before entering a prolonged pause phase. The bank believes that the continued improvement in inflation will prompt the Federal Reserve to increase the intensity of rate cuts, which will drive the S&P 500 Index to climb to 8000 points and beyond. The institution also pointed out that the U.S. economy is showing increasingly evident K-shaped differentiation, with the widening wealth gap reshaping consumer habits and confidence. JPMorgan believes that this economic differentiation may lead to "volatile market sentiment": on one hand, unhealthy economic fundamentals, and on the other, the prospects of large companies benefiting from the expansion of AI applications across industries continuing to improve, creating a sharp contrast between the two. The strategy team wrote in the report, "Global companies and governments are rushing to invest in AI, driven by both the pursuit of productivity improvements and concerns about being left behind." "The momentum of AI development is gradually expanding globally and covering diversified industry sectorsranging from technology, utilities to banking, healthcare, and logistics. Winners and losers in the industry will inevitably emerge in this process. The core challenge is: this disruptive change is happening in an already unhealthy K-shaped economic environment, and AI is expected to further exacerbate this differentiation. Over the next few years, the 'wall of worries' related to AI may persist." Morgan Stanley: Short-term weakness is a good opportunity for position, expected S&P 500 Index to climb to 7800 points next year Morgan Stanley's strategist Michael Wilson also has an optimistic stance, expecting the S&P 500 Index to rise to 7800 points in the next year. Wilson believes that the recent market sell-off is nearing its end, and any short-term weakness is a good opportunity to position for a bullish market in 2026. He predicts that the Fed's rate cuts will provide support for the stock market, while AI technology will drive efficiency improvements for companies. His strategy team is particularly bullish on non-essential consumer goods, healthcare, finance, industrial sectors, and small-cap stocks. Deutsche Bank: Profit diffusion drives long bull market, S&P 500 Index aims to break through 8000 points by the end of 2026 Deutsche Bank has shown the most optimistic expectations on Wall Street, setting an end-of-2026 target of 8000 points for the S&P 500 Index. The bank's confidence stems from its expectation of profit growth "diffusion." Deutsche Bank's stock strategists predict that earnings per share of the S&P 500 Index will increase significantly by 14% to $320 in 2026. The bank believes that the growth momentum brought by AI will transcend the realm of the "Fabulous Seven" in the U.S. stock market, spreading to broader market sectors such as the financial and cyclical sectors, thus driving a more extensive bull market. The analyst team led by Jim Reid described 2026 as "by no means a dull year," and noted that rapid AI development will continue to dominate market sentiment. On the economic front, Deutsche Bank economists have raised their forecast for U.S. GDP growth in 2026 to 2.4%, citing reasons such as a technical rebound after the government shutdown, Fed rate cuts, fiscal support, and easing trade uncertainties.