No doubt about it: when large-cap stocks keep marching higher, it can feel like the party will never end. In early 2026, the S&P 500 index continues to hit new all-time highs and analysts are almost universally bullish.
Whether it’s through the SPDR S&P 500 ETF (NYSEARCA:SPY), the Vanguard S&P 500 ETF (NYSEARCA:VOO), or another exchange traded fund (ETF), investors are enthusiastically piling into the S&P 500. Some are following the advice of Wall Street strategists, who largely expect the S&P 500 to climb in 2026.
Yet, contrarian investors may express concerns when so many analysts are crowded into the long side of the trade. After all, when practically everyone’s on one side of the proverbial boat, that boat is liable to tip over.
Abnormal Returns
Although 2022 wasn’t a great year for large-cap U.S. stock investors, the following three years yielded outsized gains. In fact, the S&P 500 returned 26.3% in 2023 followed by 25% in 2024 and 17.9% in 2025.
Throughout the years, the prevailing wisdom has been that investors should expect to earn 8% to 10% per year from an S&P 500 fund. So clearly, the past three years’ stock market returns have been unusually robust.
Now that 2026 is here, analysts on Wall Street are publishing their S&P 500 price targets for the new year. Evidently, they’re overlooking the historical weakness of midterm election years (2022 provides an example of this) and projecting a fourth consecutive year of double-digit returns.
On average, as of December 22 of last year, prominent Wall Street strategists expect the S&P 500 to gain 10.15% in 2026. Furthermore, out of 21 analysts, not one of them predicts that the S&P 500 will finish flat or down this year.
This isn’t to suggest that all of the 21 surveyed Wall Street analysts were massively bullish. Still, some famous financial institutions are apparently bracing for a banner year for American large-caps.
Growth Catalysts for 2026
Out of 21 analysts, the most optimistic 2026 S&P 500 price targets are from Oppenheimer and Deutsche Bank (NYSE:DB). Oppenheimer expects the S&P 500 to rise 17.76% year over year to 8,100, while Deutsche Bank is bracing for a 16.3% rally to 8,000.
However, Oppenheimer’s and Deutsche Bank’s forecasts aren’t typical; again, the average anticipated S&P price gain is 10.15%. Still, while the price targets vary, there are recurring themes among the cited bullish catalysts.
For example, JPMorgan Chase (NYSE:JPM) strategists assigned a 7,500 S&P 500 price target for 2026, implying 9.04% returns. That’s not quite double-digit returns, but it would still represent a fairly strong performance after three years of outstanding gains.
JPMorgan strategist Mislav Matejka cited an array of bullish catalysts for the S&P 500. These include lower interest rates, cooling inflation, solid corporate earnings, and artificial intelligence (AI).
Matejka seems to suggest that an anticipated easing of interest rates will be a central growth driver for stocks. “If the economy is weaker than we project, the equity market may not necessarily take it negatively,” Matejka explained, adding, “It’ll rely on the Fed to do the heavy lifting.”
Meanwhile, Goldman Sachs (NYSE:GS) strategists posit that the S&P 500 will rally to 7,600 in 2026, which would represent an 11% annual return. For Goldman Sachs, the expected drivers will include solid economic growth, continued easing from the Federal Reserve, and a productivity boost from AI technology.
Assumptions Are Priced In
Thus, the general consensus seems to be that AI tech will drive continued growth in corporate sales and earnings. Additionally, it’s assumed that the Federal Reserve, which will have a new chairperson in May, will keep interest rates low.
Those may be reasonable assumptions, but they’ve also been known for a while. In a highly efficient market, it’s conceivable that AI-fueled earnings growth and accommodative monetary policy are already priced into large-cap stocks.
This would help to explain why the stock market ran so high during the past several years. Moreover, the market’s efficiency could account for the S&P 500 touching new highs multiple times recently.
Now in 2026, AI-reliant corporations and the Federal Reserve need to live up to the market’s lofty expectations. Otherwise, large-cap stocks will be susceptible to a disappointment-driven drawdown.
Yet, it’s also possible that corporate earnings growth and central bank policy could meet or exceed the market’s expectations. That’s why it’s dangerous to bet against the S&P 500 this year.
Consequently, it’s not prudent to short-sell large-cap stocks in 2026. Instead, if you’re concerned about overheated expectations and priced-in assumptions, you can simply reduce your position sizing. That way, you could still have some stock market exposure without losing sleep at night.