Here are BofA’s 3 big predictions for the stock market in the next year

A trader works on the floor of the New York Stock Exchange during morning trading on August 13, 2025 in New York. ANGELA WEISS/AFP via Getty Images

Bank of America is feeling good about the prospects for the market rally extending into 2026.
Strategists predict the S&P 500 will rise another 8% in the next year, while earnings will grow 12%.
The bank thinks the market is benefiting from a 1990s-style productivity boom and investment cycle.

The stock market should have another solid year in 2026, Bank of America predicts.

Despite lingering concerns about the strength of the US economy, strategists at the bank said they believe stocks will continue to enjoy solid momentum heading into 2026, and predicted a few trends that could carry the benchmark index through the next 12 months.

That comes amid an already strong, albeit wild year for markets. The S&P 500 is up 13% year-to-date, having clawed its way back to record-highs after tariffs tanked the market in early April.

“Our outlook harkens back to the 80s/90s: productivity (it’s happening, even without AI) and business investment,” BofA strategists led by Savita Subramanian wrote in a recent client note.

“A pickup in business investment after decades of underspend could be enough to drive strong GDP/EPS pickup. AI is gravy,” strategists said.

Here are the bank’s top 3 predictions for the market in the year to come:

1. The S&P 500 will climb another 8%

The benchmark index is on track to hit 7,200 on a 12-month horizon, BofA strategists said.

The bank said it based its updated price target on marking to market the expected returns for the S&P 500 reflected in its other models, which included BofA’s Fair Value Model and its Sell Side Indicator.

Chart showing S&P 500 expected return in various BofA models — BofA said it anticipated the S&P 500 to rise another 8% over the next 12 months. Bank of America Global Research

The bank’s price target is broadly in line with other forecasts on Wall Street. Earlier this year, Morgan Stanley also issued a 7,200 price target for the S&P 500 by mid-2026, while Goldman Sachs said it believed the index could hit 6,900 by mid-next year.

2. Corporate earnings will remain robust

Corporations are expected to post “great earnings growth,” strategists said, estimating that earnings in the benchmark index could grow around 12% in the next year.

Bank of America's Earnings Surprise directional indicator — S&P 500 companies are on track to post “great earnings growth,” BofA strategists said. BofA Global Research

Strategists said that the bank’s Earnings Surprise model had recently shifted into positive territory.

There are a few other factors that could contribute to “boom-time earnings,” they added:

Improved productivity and investment.
Looser monetary policy.
Consumers “normalizing” their spend on goods vs. services.
Trade uncertainty easing and the potential for further trade deals.
“Profits-positive” trends among companies, like cooling wage inflation and cost-cutting.

3. The rally will broaden out

The pool of winners in the stock market could soon broaden out past the largest tech stocks, strategists said, speculating that the “AI train” could soon spread gains to areas like energy, machinery, equipment, and financials.

“Projects delayed since April bode well for a broader investment pickup, record Munis issuance in infrastructure/transports, and incentive to spend now vs. later thanks to OBBBA all support a broader capex boom,” strategists said of other catalysts that could broaden the market’s rally.

The AI-driven rally is already showing signs of broadening out as mega-cap tech stocks slow their momentum, and other areas, like small-caps, pick up steam. The Russell 2000 index, for instance, has climbed 37% since its post-Liberation Day trough, recently touching record highs.