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The AI bubble won’t burst, but the S&P 500 won’t deliver a fourth consecutive year of double-digit returns in 2026.
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Small-cap, mid-cap, and renewable energy stocks could perform well in the new year.
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Uncertainty related to the mid-term elections could cause stocks to be volatile throughout much of the year.
A year ago, I made five predictions for the stock market in 2025. Some came true (at least partially), while others didn’t.
For example, I predicted agentic AI would be a big thing, and that Google parent Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) stock would soar. Both happened.
On the other hand, I thought that stubbornly high inflation would cause angst for investors, benefiting Costco Wholesale (NASDAQ: COST). Inflation remained high, but investors largely shrugged it off. And Costco’s share price fell in 2025. I’m clearly no Nostradamus.
Despite my mixed record last year, I’ve decided to step out on a limb with more predictions for the stock market in 2026. Here they are – and which stocks will soar the most if they’re right.
I predict that the third time will be the charm for the S&P 500 (SNPINDEX: ^GSPC). The index has delivered double-digit gains for three consecutive years, but I expect this streak will end in 2026.
Do I forecast a major market sell-off? Nope. The economy and corporate earnings seem to remain strong enough to avoid such a calamity. Instead, my hunch is that we’ll see the S&P 500 deliver single-digit gains this year.
Investors should be happy with additional positive returns. However, I suspect many have been spoiled by the strong bull market that began in late 2022 and will be disappointed in 2026.
The ginormous “Magnificent Seven” stocks have been the stars of the stock market in recent years. In 2025, international stocks were the biggest winners. I predict, though, that small- and mid-cap stocks will, at long last, take the torch in 2026.
It’s difficult to predict which small- or mid-cap stocks will be the biggest winners, but I’ll highlight one that I really like. Mirum Pharmaceuticals‘ (NASDAQ: MIRM) share price nearly doubled in 2025. I predict another great year for the small drugmaker in 2026.
Mirum’s flagship product, Livmarli, appears likely to continue gaining momentum in the new year. I expect the company to report positive results from a Phase 2 clinical study evaluating volixibat for the treatment of primary sclerosing cholangitis in 2026. In addition, Mirum’s acquisition of Bluejay Therapeutics could begin to bear fruit quickly, with positive results from a Phase 3 study of brelovitug in treating chronic hepatitis delta virus likely in the second half of the year.
