Sam Stovall, chief investment strategist at CFRA, said he believes the stock market will overcome its recent slump and resume its upward march next year. In 2026, the S&P 500 index could rise to 7,400 by the end of the year, mirroring this year’s gains, which could be about 10% higher than Monday’s benchmark close, Stovall said. This is about one-third less than growth so far this year, but still marks the fourth consecutive year of double-digit performance. Fueled by record growth in artificial intelligence, the average of the three major stocks is on pace to gain at least 10% this year, with the S&P 500 index up 15% as of mid-afternoon Tuesday. Stovall’s benchmark target for the end of 2025 is 7,000, representing a 4% increase between now and the end of December. .SPX YTD Mountain S&P 500 Year-to-Date Chart “To the surprise of many investors, 2025 may be another great year for the U.S. stock market, with the S&P 500 potentially beating the odds of a ‘three-peat,’ or not posting three consecutive double-digit gains,” Stovall said in his 2026 investment outlook released Monday. “Investors are understandably wondering whether we’ll see a fourth consecutive year of double-digit gains in 2026. We believe the bull market will persist through the end of the year, but we expect full-year gains to be below average and volatile.” Stovall, who spent 27 years as chief investment strategist at S&P Global before joining CFRA, maintains a positive outlook for stocks based on favorable trends in projected economic growth and that a recession remains bullish. Inflation is expected to fall again next year, but unemployment should remain subdued. As a result, Stovall expects S&P 500 operating earnings per share to grow by double digits. “S&P 500 EPS is currently expected to rise 10.9% in 2025, 13.4% in 2026, and 14.2% in 2027. All S&P 500 sectors are expected to increase in 2026, with double-digit increases expected from the consumer discretionary, industrials, information technology, and materials sectors,” he wrote. The strategist remains overweight in three of the S&P’s 11 sectors. This includes treasury departments, which Stovall said should benefit from lower interest rates, tighter credit spreads, an expected pick-up in merger and acquisition activity and improved credit quality. Tailwinds for the communications services sector include the continued shift to digital advertising, the upcoming midterm elections, and 2026 events such as the Winter Olympics and World Cup. Stovall remains bullish on information technology stocks. “Positives include building out AI infrastructure, strong EPS growth, improved visibility into capital expenditures, and lower (interest rates),” he said.
