Bank of America projects that the S&P 500 will see relatively modest returns in 2026.

Bank of America has become more cautious about U.S. stocks, projecting the S&P 500 to reach 7,100 points by 2026, a gain of approximately 5%. The bank stated that strong earnings do not necessarily translate into strong market returns, as valuation multiples may narrow. Bank of America forecasts 14% earnings growth but warns of waning liquidity support, reduced share buybacks, increased capital expenditures, and limited future central bank rate cuts. The bank expects the index to fluctuate between 5,500 and 8,500 points. The firm anticipates a shift in market leadership, with capital expenditures exceeding consumer spending and blue-collar spending exceeding white-collar spending, thus upgrading its consumer staples rating to "overweight" and downgrading its consumer discretionary rating. Furthermore, Bank of America believes artificial intelligence may weaken in the short term, citing uncertainty surrounding its monetization and the potential bottleneck of growing electricity demand.