CFRA chief investment strategist Sam Stovall believes that the stock market will overcome its recent hiccup and resume an upward march next year. In 2026, Stovall believes that the S & P 500 can echo this year’s advance by rallying to 7,400 by year end, or approximately 10% higher than where the benchmark closed on Monday. That would amount to about a third less than this year’s gain so far, but still mark a fourth straight year of double-digit performance. Buoyed by record gains in artificial intelligence, all three major averages are on pace to notch gains of at least 10% this year, with the S & P 500 up 15% as of Tuesday mid-afternoon. Stovall’s 2025 year-end target of 7,000 for the benchmark corresponds to a 4% gain between now and the end of December. .SPX YTD mountain S & P 500 YTD chart “Much to the surprise of many investors, 2025 may turn out to be another great year for the U.S. equity markets, bucking the likelihood that the S & P 500 would not score a ‘three-peat,’ or a third successive double-digit gain,” Stovall wrote in his 2026 investment outlook, published Monday. “Naturally, investors wonder if 2026 will see a fourth year of double-digit gains. Even though we think the bull will remain intact by year-end, we project increased volatility along with a lower-than-average full-year percentage increase.” Stovall, who served as chief investment strategist at S & P Global for 27 years before joining CFRA, bases his positive stock outlook for stocks on a favorable trend in projected economic growth, which remains bullish with no recession on the horizon. Inflation is projected to resume its decline next year, while the unemployment rate should stay under control. As a result, Stovall expects double-digit growth ahead for S & P 500 operating earnings per share. “The S & P 500 is now projected to post a 10.9% EPS rise in 2025, a 13.4% gain in 2026, and a 14.2% advance in 2027. All sectors in the S & P 500 should see [earnings] gains in 2026, with double-digit increases coming from the Consumer Discretionary, Industrials, Information Technology, and Materials sectors,” he wrote. The strategist remains overweight on three of the S & P’s 11 sectors. This includes financials, which Stovall said should benefit from lower interest rates, declining credit spreads, an expected turnaround in merger and acquisition activity and improving credit quality. Tailwinds for the communication services sector include an ongoing shift to digital advertising and 2026 events such as upcoming mid-term elections and the Winter Olympics and World Cup. Stovall also remains bullish on information technology stocks. “Positives include AI infrastructure buildouts, strong EPS growth, improving capital expenditure visibility and lower [interest] rates,” he wrote.
