Wall Street’s largest firms see 2026 as an year in which specific themes matter more than market rallying.
Instead of betting on another S&P500 gain of 17%, like in 2025. Goldman Sachs strategists Morgan Stanley J.P. Morgan and Bank of America point to five predictions that may determine who wins and who loses.
What major research firms are saying to clients about what they should watch for in 2026.
Wall Street’s 5 predictions for 2026
1. AI capital expenditure will reach $527 billion but…
Goldman Sachs predicts that the artificial intelligence capital expenditure will increase to $527 billion by 2026 from $465 at the beginning of 2025.
This is an extraordinary increase, but Bank of America’s research team has warned of the possibility of an “air pocket” by 2026 where investment will continue but profits are not yet expected.
Bank of America predicts that hyperscalers will borrow another $100 billion by 2026.
If revenue growth does not follow capital expenditure growth, then the debt is a risk.
In 2026, the real winners will be those companies who can demonstrate AI monetisation and not only capex size.
Goldman identifies cloud service providers, enterprise software companies, and semiconductors as being the main beneficiaries of an expected acceleration in adoption.
2. The sector rotation favors the financial, industrial, and healthcare sectors over technology
Morgan Stanley and Goldman Sachs predict that leadership will broaden in 2026 after mega-cap tech stocks dominate 2025.
As earnings catch up to valuations, the markets are repricing tech multiples.
The Magnificent 7 could see returns of just a single digit while the other segments of the market may experience double digits.
If the Fed’s rate cut cycle stabilizes, income investors can expect to see attractive returns and growing net interest margins.
Industrials can benefit from the acceleration of AI capex and infrastructure investments.
Bank of America warns that the rotation of leadership is not guaranteed. If AI monetisation accelerates again, technology could quickly reclaim its position.
3. Oil remains weak; gold soars up to $4,900
Goldman Sachs commodities team made one of the boldest predictions for 2026: Gold to reach $4,900 an ounce at year’s end, and oil to average just $56 a barrel.
Gold’s thesis is based on central banks buying gold in large quantities (Goldman anticipates 70 tonnes per monthly) and Fed rate reductions driving demand for exchange traded funds.
J.P. Morgan sees gold reaching $5,055 an ounce in Q4 of 2026.
The opposite is true for oil. The market will be oversupplied unless there are major geopolitical events that disrupt the supply.
Goldman expects Brent crude to be at $56 versus the consensus view of $62.
The divergence between gold and oil, which is up dramatically, represents the major macro-risks that will be facing us in 2026, including inflation uncertainty, as well as energy transition dynamics.
4. Which assets will outperform based on the Fed’s interest rate trajectory?
Morgan Stanley and J.P. Morgan predict that the Fed will gradually reduce rates in 2026. Then, the yields should stabilize as the inflation data settles.
The yields of both firms are expected to be in the range between 3.5% and 4.5%, rather than experiencing a drastic collapse.
It is important because returns are shaped simultaneously across bonds, equities and commodities.
Gold demand is a classic result of geopolitical unrest and lower real rates.
As deal flows normalize, Fixed Income teams expect higher volatility to be realized and more M&A opportunities.
The absence of an abrupt rate spike or cut creates the Goldilocks situation for equity investors: moderate upside but moderate downside risks if earnings are disappointing.
5. S&P targets reveal deep disagreements on valuation risks
J.P. Morgan expects S&P 500 to reach 7,500 at year’s end 2026. This is based on a 13-15% growth in earnings and two Fed rate reductions.
Morgan Stanley’s Michael Wilson has set a target of 7,800 based on earnings assumptions similar to those used by Morgan Stanley.
Savita Subramanian, from Bank of America, offers only a 4% increase over current prices. She cites valuation risks and the need to “reset” markets if earnings are disappointing.
Morgan Stanley and BofA are in genuine disagreement over whether earnings will grow without multiple compression by 2026.
The uncertainty itself is a sign of volatility, and traders and investors alike should be prepared for it as the year 2026 unfolds.
Will the market require cheaper multiples to push higher or will it demand higher values?
The post 5 Wall Street predictions for 2026: From AI to Gold may change as new information is revealed.
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