Final Major Wall Street Bank Sees Double-Digit S&P 500 Gains by 2026

The last major Wall Street bank to publish its 2026 market targets is forecasting double-digit gains for the S&P 500, joining peers that see upside despite stretched valuations. In its outlook, the unnamed firm acknowledges that current price-to-earnings ratios are elevated, but argues the level of valuations is a headwind rather than an insurmountable barrier to further equity appreciation.

Analysts at the bank point to a combination of factors that could support continued gains: modest pickup in corporate earnings, ongoing share-buyback activity, potential multiple expansion if macro risk recedes, and the prospect of a gradual easing in interest-rate pressures should inflation normalize. The bank’s view assumes a backdrop of steady — not runaway — economic growth, allowing profit margins and revenue progression to outpace the drag from lofty starting multiples.

That said, the report includes a balanced set of caveats. A sharper-than-expected slowdown in growth, persistent inflation that forces central banks to maintain higher-for-longer policy, or an abrupt widening in credit spreads could all derail the forecast. The bank also flags sector concentration risk: gains in the S&P 500 may be driven by a narrower set of large-cap leaders, meaning broad-based rallies are not guaranteed.

For investors, the bank recommends selective positioning. Tactical overweight allocations to cyclicals and high-quality growth names are suggested if economic indicators continue to improve. Conversely, hedges and cash buffers are advised in scenarios where downside risks materialize. The house view also stresses monitoring of earnings revisions, consumer demand metrics, and central-bank guidance as primary signals that would validate or undermine the projected path.

MarketWatch, which reported on the bank’s outlook, notes that the forecast completes the latest round of 2026 projections from major firms — with this final note tipping the collective view toward cautious optimism. Ultimately, the bank’s forecast frames high valuations as a significant but surmountable challenge: achievable gains rely on earnings momentum, manageable interest rates and continued corporate capital returns, while geopolitical shocks or policy surprises could quickly reshape the landscape.