It’s the most wonderful time of the year: Wall Street prediction season.
Bank strategists are weighing in on where they see the S&P 500 landing by the end of 2026. BI’s Jennifer Sor has a roundup of what the top Wall Street firms are projecting.
My colleague, Joe Ciolli, author of the fantastic First Trade newsletter, has already written extensively about these predictions. I figured it made sense to chop it up with him.
Dan: Before we get into what Wall Street is predicting for 2026, let’s get into why (or why don’t) these predictions matter in the first place. Do they hold real weight, or is it just another bit of speculation?
Joe: Given the wide range of outcomes, it’s a highly speculative exercise. But on a directional basis, it’s an important guidepost for investors. The ones that do their homework can compare the various theses and see who they align most closely with, then follow that strategist’s calls all year.
Dan: It’s like college football’s preseason rankings. A helpful guide, but not set in stone. (Look at Penn State, which started the season ranked #2 in the country and finished 6-6. Yikes!)
With that in mind, it’s also worth noting that analysts underestimated the S&P’s performance over the last few years, which is perhaps why they’ve gotten so aggressive for 2026.
Joe: Yes, it’s very possible that they’re overcorrecting after undershooting the S&P 500 the last two years. Wall Street was collectively 18% off the mark in 2024, and while they’ve been better this year, they’re still lagging by 4%. But they have been directionally correct. Ultimately, it’s a better move to pick a strategist or two to follow, rather than try to obey the entire hive mind.
Strategist forecasts have been like Indiana football. Picked to finish 20th in the nation, they’re now the top-ranked team in the country.
Dan: The other interesting wrinkle is the Fed. We’re getting a new chair — Thanks for the memories, Jerome! — and all the potential complications that come with that.
Joe: That’s absolutely a key factor, and the top wild card of 2026. There’s a growing view that the new Fed chair will do Trump a solid and cut rates at will. That economic stimulus actually underpins the lofty earnings-growth forecasts most major firms have.
But, as Apollo chief economist Torsten Sløk recently highlighted, there’s a risk that those assumed rate cuts cause an inflation spike. And what’s the best remedy for high inflation? Rate hikes, which could throw a serious wrench into best-laid bullish plans.
Dan: Let’s wrap up by throwing our hat in the prediction ring. I love a same-game parlay, so I’ll offer a two-in-one pick. The S&P 500 will drop below 6,000 (about a 15% dip from current levels) before ultimately finishing the year above 7,200 (about 5% increase from where we are at). VIX traders, enjoy!
Joe: Wow! I’m going to do something no major Wall Street bank has had the guts to do yet: predict an S&P 500 decline for next year. Under my scenario (let’s say 6,850, about 0.2% below current levels), investors won’t get as many rate cuts as they’re currently banking on, even with a new Fed chair. Like the AI trade, rate-cut expectations are priced to perfection. I think that’ll be spoiled by something unforeseen.
And if I end up being wrong, this conversation never happened.
Dan: Yeah, call me Lane Kiffin because I’m already moving on to the next one.
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