JPMorgan Private Bank has projected that the S&P 500 could extend its multi-year streak of strong returns into 2026. Year-to-date, the index has already climbed 16%, following gains of at least 23% in each of the prior two years. The firm’s base-case scenario anticipates a combination of reaccelerating economic growth, robust corporate earnings, and steady advancements in AI technology to propel the index to 7,400 by next year—a 9% rise from current levels. Should these tailwinds strengthen further, the index could even rally to 8,200, implying a 20% surge by year-end 2026.

This bullish outlook arrives amid Wall Street jitters over AI-related uncertainties and signs of economic softness. A 4% rebound in U.S. stocks over the past four days has tempered bearish warnings of an imminent broad-market correction, reigniting optimism among equity bulls.

Jacob Manoukian, U.S. Head of Investment Strategy at JPMorgan Private Bank, and Stephen Parker, Global Head of Investment Strategy, argue that the S&P 500’s recent 5% pullback from October’s record high confirms the market is not gripped by the speculative frenzy typical of bubbles.

Parker noted in a recent interview, “Many of our clients are sitting on significant cash reserves. For them, our 12- to 18-month view is clear: this is a compelling opportunity. We see it as a buying moment, though not necessarily the absolute bottom.”

The bank identifies technology and utilities as key sectors for 2026, given their AI-driven potential. Healthcare, industrials, and financials are also poised to outperform, supported by market expansion, deregulation, and M&A activity.

To hedge against inflation, JPMorgan advises clients to diversify into “shock absorbers” like infrastructure, real assets, and gold, while emphasizing private markets as a continued source of yield.

Manoukian added, “We’re witnessing a structural shift where the line between public and private markets is blurring. Avoiding private markets means missing out on AI’s most dynamic and innovative segments.”

This optimism aligns with JPMorgan’s equity research team, led by strategist Dubravko Lakos-Bujas, who forecasts the S&P 500 reaching 7,500 (up 10%) by end-2026, fueled by earnings growth and Fed rate cuts. A faster-than-expected decline in inflation could push the index to 8,000.

Other institutions echo this sentiment: Deutsche Bank’s Binky Chadha predicts an 18% rally to 8,000, while Morgan Stanley’s team targets 7,800 in 12 months.

Despite the upbeat outlook, JPMorgan acknowledges a bear case where AI stagnation or economic recession could drag the S&P 500 down 32% to 4,600.

Manoukian warns of “material risks” if AI models plateau or spending fails to monetize, while Parker flags Fed independence as a macro concern if inflation resurges amid political pressure for loose policy. For now, strong corporate earnings and economic resilience underpin their confidence.

“This year’s market story is straightforward: U.S. companies consistently beat earnings estimates, driving the S&P 500’s 15% gain without multiple expansion. We expect this earnings-led momentum to persist next year,” Manoukian concluded.