JPMorgan’s (JPM) top stock market strategists think 2026 will be another good year for US investors.
The firm’s equity strategy team, led by Dubravko Lakos-Bujas, set a year-end price target of 7,500 for the S&P 500 (^GSPC) in 2026.
Should the Federal Reserve continue cutting interest rates, however, the bank thinks the S&P 500 could surpass 8,000 in the year ahead.
“Despite AI bubble and valuation concerns, we see current elevated multiples correctly anticipating above-trend earnings growth, an AI capex boom, rising shareholder payouts, and easier fiscal policy (i.e. [One Big Beautiful Bill Act]),” the firm wrote in a note to clients published Tuesday.
“More so, the earnings benefit tied to deregulation and broadening AI-related productivity gains remain underappreciated.”
JPMorgan’s 7,500 call for next year is primarily supported by expected earnings growth of between 13% and 15% over the next two years. In the third quarter, S&P 500 companies grew earnings by 13.4% from the prior year, according to FactSet data.
The firm’s baseline outlook also sees the Fed cutting rates two more times — markets were pricing in an 85% chance the Fed cuts rates next month as of Wednesday morning — before an extended pause. An improving inflation outlook that prompts more rate cuts is what JPMorgan sees catalyzing a rise toward, and above, 8,000 for the benchmark index.
The firm’s call that the S&P 500 will reach 7,500 next year also makes it the second Wall Street bank this week to put that target on the index for 2026, with strategists at HSBC making the same forecast in a note published Monday.
The S&P 500 closed Tuesday’s trading session at 6,765.
Both firms also note that the US economy is becoming increasingly K-shaped, with wider extremes between the haves and have-nots reshaping spending habits and consumer confidence.
Read more: What is a ‘K-shaped’ economy, and what’s causing the divide?
This most recent earnings season showed that consumers on the lower end of the income scale continue to struggle — or in retailer lingo, remain “choiceful” — while those with greater means (and often more exposure to the stock market) are spending freely.
For stock investors, this dynamic is also likely to keep sentiment “prone to sharp swings,” in JPMorgan’s view, as this unhealthy economic backdrop is contrasted with an improving outlook for large firms set to benefit from a broadening out of AI trends across industries.
“Both corporates and governments across the world are racing to invest in AI in search of productivity gains and out of fear of becoming obsolete,” JPMorgan’s team writes.