Since 2020, U.S. stocks — as measured by the S&P 500 — have delivered returns so strong they seem implausible, even in hindsight.
Despite the shock of the Covid-19 pandemic, the index logged 18% gains in 2020 and a staggering 29% in 2021. It then endured a brutal slide in 2022, falling 18%. In 2023, it staged a major comeback, surging 25%. Yet another strong year followed in 2024, with total returns again north of 20%. Now 2025 is on track to deliver returns around 17%, despite dramatic falls tied to tariff announcements and AI-bubble fears. In total, the index has doubled from its 2020 lows.
The steep upward climb has left analysts and investors conditioned to expect endless upside — volatility or no — and it looms large over Wall Street's outlook for 2026. In fact, what's most striking about 2026 forecasts just might be the absence of pessimists, at least at major firms. It’s not a case of bulls versus bears — it's bulls versus slightly-more-bullish bulls. Nearly every major bank expects U.S. stocks to deliver positive returns, with most calling for gains in the high single digits to low teens. What debate there is centers on whether mega-cap tech will continue to lead the market, and whether falling interest rates and AI spending will finally bring gains to smaller, less-prominent companies.
JP Morgan: Double-digit gains, AI supercycle intact
JP Morgan Global Research is forecasting “double-digit gains” across both developed and emerging markets. The call rests on a familiar but powerful mix of factors, including earnings growth and lower interest rates.
The bank sees the AI-driven "supercycle" as a central force, fueling companies' capital spending and contributing to greater profitability across a wide range of industries — from tech to utilities to banks themselves. At the same time, JP Morgan strategists warn that AI could further intensify market concentration and deepen the already K-shaped economy.
Morgan Stanley: S&P 7,800
Morgan Stanley $MS is among the most optimistic voices on U.S. stocks heading into 2026, projecting the S&P will climb to around 7,800 over the next 12 months — representing roughly a 14% gain.
The firm's bullish stance relies on Federal Reserve rate cuts, sizable corporate tax cuts, and AI-driven efficiency gains. While Morgan Stanley expects volatility along the way, strategists argue the bull market remains intact, with U.S. earnings and cash-flow growth far better positioned than those in overseas markets.
Goldman Sachs: Small caps' moment may finally have arrived
Perhaps the most surprising call comes from Goldman Sachs $GS, with analysts making a case for small-cap stocks to outperform. If this call bears out, it would represent a return to familiar market behavior after years in which mega-cap tech overwhelmingly dominated returns.
Goldman notes that U.S. small caps have outperformed the S&P by an average of roughly 12% following the end of the past Fed rate-cutting cycles. The firm also sees scope for broader market outperformance as AI-driven capital spending — which is now concentrated among a handful of mega-caps — begins to spill over into a wider range of suppliers and beneficiaries. Such a dynamic could help smaller companies capture a greater share of investment dollars, Goldman argues.
Bank of America's more modest call
Bank of America $BAC strikes a more restrained tone, arguing that strong earnings growth may not translate into equally strong market gains. Savita Subramanian, the firm’s head of U.S. equity strategy, expects S&P 500 earnings to grow about 14% in 2026, but sees price appreciation limited to roughly 4% to 5%, with a year-end target of around 7,100. The disconnect, she suggests, reflects a potential shift from a consumption-driven bull market toward a more capital-expenditure-heavy one.
What unites the bulls
Strip away the specific targets, and Wall Street's 2026 forecasts share several common threads. Nearly all assume that the AI investment cycle continues and that interest rates fall meaningfully. Many expect earnings growth in the high single digits, broadly in line with predicted market gains. That's a way of saying they expect stock-price appreciation to follow fundamentals more than enthusiasm or speculation.
Whether small caps finally join the party, as Goldman suggests, or mega-cap tech extends its dominance, as others expect, appears to be the most consequential question. Either way, the consensus is clear. Experts all seem to think this bull market isn't over — at least not yet.