2026 Outlook | Where Will the US Stock Market Go Next Year? A New Script Has Emerged: Major Rotation Among Fed Voters, Midterm Elections... These Major Events Will Impact Your Wallet.

Fellow investors, 2025 is about to close, and as we face a brand-new 2026, instead of anxiously chasing trends, it's better to calmly understand the direction. Follow@牛牛課堂to unlock your investment roadmap in real time. In the new year, let’s stay calm and patient, proceed steadily for long-term success, and slowly grow our wealth together.

As the volatile year of 2025 draws to a close, Wall Street heavyweights are issuing dense forecasts regarding next year's market trends.

Overall, several major Wall Street firms have issued optimistic forecasts for the US stock market in 2026. Oppenheimer Asset Management has provided the most aggressive prediction on Wall Street so far. The firm's Chief Investment Strategist anticipates that, driven by robust corporate earnings growth and the resilience of the US economy, the S&P 500 index willclimb further to 8,100 points in 2026.

Additionally, Deutsche Bank has, for the first time, raised its S&P 500 target to 8,000 points; HSBC has set its 2026 target for the S&P 500 at 7,500 points, while JPMorgan predicts the index will reach 7,500 points, with potential to test 8,000 points if the Fed continues to cut interest rates.

Looking ahead to 2026, how will the US stock market perform? What major events should investors watch? This article will provide an in-depth analysis.

In 2026, how will the US stock market perform?

Looking ahead to 2026, almost all leading strategy teams, from Bank of America, Morgan Stanley, Goldman Sachs, to BCA Research, are conveying the same message:Capital will shift from 'storytelling assets' to 'assets more sensitive to the real economy.'

Goldman Sachs has confirmed that global equities will remain in a bull market through 2026, but index returns are projected to be lower than in 2025.The market is entering the 'optimistic phase' of the cycle, where investor confidence is improving, but gains will be more rational.

UBS Group believes that the US stock market is expected to rise amidst volatility next year, based on its bottom-up approach—The consensus target, calculated by aggregating earnings forecasts for individual companies, is for the S&P 500 Index to rise 16% to 7,900 points by the end of 2026.In contrast, the top-down approach—Based on macroeconomic models, strategists forecast an average target price of 7,500 points for the index, implying a 10% upside for next year.

UBS Group notes that current market expectations are optimistic, positioning leans bullish, and valuations are at high levels, meaning limited buffer capacity to absorb negative news.As a result, the probability of significant pullbacks is higher than usual.However, given the continued strong profitability in the artificial intelligence sector and the dominance of upside risks to nominal growth, these pullbacks should be viewed as buying opportunities.

Oppenheimer believes that driven by robust corporate earnings growth and the resilience of the U.S. economy, the S&P 500 index will further rise to 8100 points by 2026. The team emphasized thatthe core supporting this optimistic forecast lies in earnings per share (EPS) maintaining double-digit growth continuously.Oppenheimer expects that as the U.S. economy demonstrates stronger-than-expected resilience, corporate profitability will improve further, with overall earnings growth projected to reach 12% next year. This earnings-driven upward logic is considered a key factor underpinning valuation expansion.

Barry Bannister, Chief Equity Strategist at Stifel, a well-known U.S. investment firm, recently projected thatif the U.S. economy remains strong in 2026, the S&P 500 index will rise by 9%. However, if a recession occurs, investors should be prepared for a rapid 20% decline in the benchmark index.

What major events are worth watching?

We have compiled a list of significant events for next year for fellow investors' reference:

First,Entering 2026, the Federal Reserve will undergo a 'major personnel turnover.'This personnel change may exacerbate internal divisions within the FOMC, adding uncertainty to the Fed’s rate-cutting process this year.

The Federal Reserve holds eight interest rate meetings annually, where all 12 regional Fed presidents discuss and debate monetary policy. However, only seven Fed governors and the president of the New York Fed hold fixed voting rights, while four of the remaining 11 regional Fed presidents have voting rights, rotating annually.

In addition,According to CNBC, Trump may appoint a new Federal Reserve Chair in the first week of January.The current Federal Reserve Chair Jerome Powell's term will end in May next year. The incoming appointee, who is expected to be a close ally of Trump, aims to push for significant interest rate cuts—a task that Powell has consistently resisted.

Additionally, the U.S. midterm elections will influence the markets throughout most of next year.

Data from betting markets show that the probability of Democrats taking control of the Senate is 33%, while their chances of controlling the House of Representatives are as high as 74%. Over the past six months, the latter figure has fluctuated significantly—reaching as high as 85% and dropping as low as approximately 55%.

This indicates that anything is possible, but Trump and the Republican Party face significant challenges in maintaining full control of Congress. They must contend with both the historical precedent of poor midterm election outcomes for the incumbent party and Trump’s declining approval ratings.

Historical data shows that the ruling party often finds itself at a disadvantage during midterm elections, particularly in House races. Since the American Civil War, out of 39 midterm elections, the ruling party has lost its majority in 35 instances.This may stem from the uncertainty surrounding midterm elections or the residual effects of the President's first year in office, but regardless of the cause, it tends to negatively affect stock market returns.

Looking back at data since 1927, the second year of a U.S. President's term (the midterm election year) has seen the lowest average and median returns for the S&P 500 Index.

However, once the midterm elections conclude in November next year and political uncertainty declines, the stock market typically begins to rise before the end of the year.

Currently, global stock market trends largely align with the trajectory seen during Trump's first term. If history repeats itself, investors should prepare for potentially higher market volatility as the November 2026 midterm elections approach.

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