S&P 500's Outlook For 2026: Don't Expect This Rally To Fade

Oakoff InvestmentsInvesting GroupFollow5ShareSavePlay(11min)CommentsSummaryThis decade keeps humiliating consensus: COVID crash, inflation shock, missing recession, Liberation Day drop. Today's AI bubble fear feels crowded - and likely wrong. Macro doesn't scream 2026 top: inflation expectations stay anchored, corporate credit spreads remain tight, and markets aren’t pricing default stress despite headline-specific scares. Valuations are stretched via CAPE, and I’ve flagged overheating before. Still, history suggests bubbles can run another year after reaching today’s extremes. AI capex may translate into broad earnings via productivity, not just Magnificent 7. If growth accelerates without inflation, we could echo late-1990s dynamics. My 2026 S&P 500 price target range is 7,500-9,800, with even the bear case showing upside; risks remain if macro or AI productivity disappoints. AlexSecret/iStock via Getty Images Out-Of-Consensus Thinking For The S&P 500 (SPY) If we take a look at what this decade has given us so far, we'll notice that most outlooks failed, and the market was making what the consensus wasn't pricingThis article was written byOakoff Investments9.74K FollowersFollowOakoff Investments is a personal portfolio manager and a quantitative research analyst with 5 years helping readers find a reasonable balance between growth and value by sharing proprietary Wall Street information. He leads the investing group Beyond the Wall Investing with features that include: a fundamentals-based portfolio, weekly analysis on insights from institutional investors, regular alerts for short-term trade ideas based on technical signals, ticker feedback by request from readers, and community chat. Learn more.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in SPY, VOO, QQQ, over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsWhat underpins the Buy rating for SPY into 2026?Favorable macro conditions, strong AI-driven CAPEX, and robust EPS growth projections support a Buy, with a base case S&P 500 target of ~$8,760 for 2026.How does the article address concerns about an AI bubble in SPY?It argues that macro signals and historical CAPE precedents suggest the AI bubble narrative is premature, and that 2026 is unlikely to see a market top.What are the key downside risks to the S&P 500 outlook?If AI CAPEX fails to deliver lasting productivity or macro turns adverse, SPY could reprice to historical multiples, with a downside scenario target of ~$5,875 (-14.6%).Recommended For You