Wall Street strategists are cautiously optimistic that the rally in US stocks has more room to run.
The benchmark S&P 500 index is on track to closing its third straight year with double-digit gains. But the “bull market is still alive,” said Fundstrat’s senior expert Tom Lee in his latest report.
On average, strategists believe US equities will gain another 11.6% through the end of 2026 – with the following three tailwinds playing a central role in driving them higher.
Rate cuts to sustain upward momentum in US stocks
The US central bank announced a 25 basis points rate cut on December 10th and is broadly expected to lower the federal funds rate further in 2026.
Lower borrowing costs would ease pressure on corporate balance sheets, boost capital investment, and support consumer spending.
According to Wall Street strategists, a friendlier Fed could help earnings growth catch up to lofty valuations – reducing the risk of a sharp correction in the coming year.
Historically, the US stock market performs well during periods of monetary easing, and investors are betting that this cycle will be no different.
The prospect of cheaper credit is seen as a critical ingredient for sustaining momentum in 2026.
S&P 500 index to rally on fiscal stimulus next year
What may also help retain upward momentum in US stocks next year is the Trump administration’s sweeping fiscal package, dubbed the “One Big Beautiful Bill Act”.
The said legislation is designed to breathe new life into an economy that has recently demonstrated signs of a slowdown.
Provisions include infrastructure spending, tax incentives, and measures aimed at easing regulatory burden for businesses.
Wall Street experts expect this stimulus to offset lingering concerns about tariffs and trade disputes in 2026 – enabling companies to refocus on growth rather than defense strategy.
By boosting demand and improving corporate sentiment, the bill will likely create a more favorable environment for earnings expansion, paving the way for the S&P 500 index to deliver another year of double-digit gains.
AI remains a major tailwind for US equities
Finally, the transformative power of artificial intelligence (AI) may continue to push US stocks up further in 2026.
AI is broadly expected to drive productivity gains across industries, with earnings growth in tech mega-caps gradually catching up to their valuations.
More importantly, the AI benefits could spread beyond Silicon Valley next year, reaching sectors such as healthcare, manufacturing, and logistics, according to Wall Street strategists.
This diffusion of artificial intelligence-driven efficiency could accelerate profits across the broader economy, providing a foundation for sustained equity gains.
Investors see AI not just as a tech story but as a structural shift that improves competitiveness and margins across the board.
As adoption accelerates, the market narrative is shifting from hype to tangible results, reinforcing confidence that the bull run can extend into 2026.
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