Welcome to 2026 — the year the stock market does what it always does in the middle innings of a transformational boom: it makes you money… and then repeatedly attempts to shake you out of your position like a malfunctioning carnival ride.

Because the U.S. market is still standing on a very simple foundation — earnings growth, liquidity, and narrative. And in 2026, all three of those pillars are still very much alive.

Earnings should keep grinding higher because the AI Boom is not a fad … it’s the biggest capital spending cycle since the internet buildout.

Liquidity should improve because inflation is cooling and the Fed has every reason to cut rates as unemployment rises and the political temperature climbs.

And the narrative? Please. Wall Street is not going to suddenly stop falling in love with a story that involves trillion-dollar capex budgets, sci-fi tech, and the promise of making every company on Earth “more efficient” by replacing humans with algorithms.

So yes, I think the S&P 500 can rally more than 20% in 2026. But I also think the market will be very volatile next year, with lots of twists and turns, and a few surprise mega-winners along the way.

With that in mind, here are my five predictions for the U.S. stock market next year…

Prediction #1:

The S&P 500 rises 20%+, because earnings grind higher, multiples stay elevated, and Washington discovers stimulus again

Let’s start with the thing everyone is thinking but only half the market is willing to say out loud: a 20%-plus year for the S&P 500 in 2026 is not only possible — it’s mathematically boring. It’s not some exotic prediction that requires aliens, perpetual motion machines, or a sudden outbreak of fiscal responsibility in Congress.

It requires three things:

1. Earnings keep rising (even modestly).
2. The multiple doesn’t collapse.
3. Policy is at least mildly supportive (Fed cuts plus White House growth initiatives ahead of midterms).

The EPS math is the cleanest way to express it:

• Street-ish 2027 EPS estimates sit around $350 (give or take, depending on the source and whether you’re using operating vs GAAP).
• If those estimates just “do what they usually do” in a functioning economy—drift higher as time passes and companies execute—you get $360 without breaking a sweat.
• The market multiple? Call it ~23x forward. That’s not a wild assumption in today’s regime — it’s basically where we’ve been living for the past two years.

Now do the world’s least sexy calculation:

23 × $360 = 8,280

That’s your year-end 2026 target — and it’s 20%-plus upside from the neighborhood we’re currently trading in.

Will it feel “reasonable” when we get there? Absolutely not. Bulls never feel reasonable in real time. That’s the whole point. The market climbs a wall of worry, and in 2026 the wall will have Wi-Fi, an AI agent, and a Congressional hearing.

The fundamental logic is that the U.S. economy in 2026 likely remains a weird beast: growth holds up, earnings hold up, and the Fed is cutting because inflation is cooling and the job market is wobbling. If the Fed is easing and earnings are rising, the market’s default setting is not “panic.” It’s “re-rate.” Even if the multiple doesn’t expand, it can stay high.

And yes, midterms matter. It’s not a conspiracy theory to say the White House wants a better economy and a happier electorate heading into a midterm year. That’s not politics. That’s just… Tuesday.

Prediction #2:

The ride is not smooth: 2026 delivers multiple 10%+ corrections, and you’ll hate it while it’s happening

Now for the part nobody puts in the glossy year-ahead deck: even if the S&P rips higher, 2026 is likely a stomach-churner. Not because the bull case is wrong … but because the market is entering the phase where everything matters again.

We are in Year Four of the AI Boom. And Years Four and Five of transformational booms tend to be the “best years” and the “most abusive years” at the same time.

By Year Four:

• the narrative is dominant,
• positioning is crowded,
• expectations are sky-high,
• and every small crack in the story gets treated like an earthquake.

And the market doesn’t need a recession to correct 10–15% when valuations are elevated. It just needs a cocktail of rates backing up, one hyperscaler pausing a project, a financing headline, or a “profit margins are peaking!” panic from someone with a chart and too much confidence.

That’s why – although stock market history says 10%-plus corrections only happen about once a year, if that – we got six different 10%-plus corrections in the Nasdaq in 1998 and 1999 (Years Four and Five of the Dot-Com Boom).

We should assume multiple corrections in Year Four of the AI Boom, too, because that’s just what happens at this point in the cycle. You get big steps forward and big steps backward.

Here’s the bigger point: volatility isn’t the enemy of the bull market. It’s the admission price. If you want 20%-plus upside in a year that’s built on a concentrated AI-led growth engine, you don’t get that upside without intermittent “what if this is 1999?” episodes.

Ironically, the more right you are about the trend, the more violent the countertrend moves become — because the trade gets crowded.

So yes: up big, but with punches. Multiple of them. Possibly in clusters. With no warning label.

Prediction #3:

AI stocks stay the hottest stocks on Wall Street, but the boom becomes brutally selective

AI is still the center of gravity. Not “one of the themes.” Not “an interesting growth area.” AI is the industrial buildout of this decade — the thing that reorganizes capital spending, labor markets, and competitive strategy.

That’s why, in 2026, I expect AI stocks to remain the leadership cohort — even as the boom gets more selective.

This is the transition from “Spend at all costs” to “Spend efficiently, or get yelled at on earnings calls.”

In other words, the market stops rewarding capacity and starts rewarding utilization.

The first phase of the AI Boom was about one question: How fast can we get compute online?

The 2026 phase becomes: How much profit does this compute generate?

That shift doesn’t kill AI spending. It just concentrates it.

The winners in 2026 will increasingly be the companies that:

• sit at the bottlenecks (performance per watt, networking, memory, cooling, power delivery),
• have clear demand signals (contracts, usage, revenue attach),
• and can fund expansion with cash flow rather than “vibes and a bond deal.”

Meanwhile, the vulnerable names are the ones that require the market to stay in a permanent state of generosity:

• levered balance sheets,
• thin margins,
• customer concentration,
• “we’ll monetize later” stories,
• or business models that break if the cost of capital stays high.

The punchline is simple: AI becomes the dominant engine of U.S. growth … and the stock market becomes even more concentrated around whoever owns that engine.

That’s why the S&P can rally strongly even if large parts of the economy are… let’s call it “fine.” The index doesn’t need everything to be great. It needs the biggest weights to keep printing earnings.

And that’s exactly what efficient spending delivers: less waste, more returns, more earnings concentration … and therefore a more top-heavy market.

Prediction #4:

Space stocks are among the best performers, powered by a SpaceX IPO vortex and “orbital compute” as the next sci-fi-to-capex bridge

This one has major “this sounds insane until it’s suddenly the only thing anyone talks about” energy.

Space in 2026 gets two catalysts that rhyme:

(A) SpaceX IPO

Reuters has reported that SpaceX is preparing for a potential 2026 IPO, and the surrounding reporting/letters have pointed to massive valuation numbers and substantial capital-raising ambitions (with the standard caveat that timing and valuation can change).

If that stays on track, it does what mega-IPOs always do:

• creates a category spotlight,
• drags generalist money into the theme,
• lifts “space-adjacent” public names by association,
• and triggers an arms race of “what’s the next SpaceX?”

The market loves a flagship.

(B) Orbital compute

At the same time, “orbital compute” starts to smell like the kind of narrative that markets price early and monetize later — which is basically the stock market’s favorite business model.

As terrestrial data centers run into constraints (power, permitting, cooling), the notion of pushing some compute workloads to orbit becomes increasingly discussable — not because it’s easy, but because the bottlenecks on Earth make people willing to explore weird solutions.

JPMorgan has explicitly discussed “bubble watch” dynamics and dot-com comparisons in the current environment, underscoring how fast narratives can become self-reinforcing when capital is chasing a transformational theme. J.P. Morgan And orbital compute has all the ingredients of a narrative asset:

• futuristic,
• capital-intensive,
• dependent on a few platform enablers,
• and tied to the biggest private company catalyst in the space ecosystem.

Will orbital compute be a meaningful revenue driver in 2026? Probably not in aggregate.

Will it be a meaningful stock narrative in 2026? Oh, absolutely. And in markets, narratives are often the first derivative of money.

So I expect space stocks — especially those linked to launches, satellites, space infrastructure, communications, and “bits in space” — to be among the best performers as this theme matures from curiosity to “portfolio sleeve.”

And yes: this will be volatile too, because space stocks were invented specifically to remind you that beta is a lifestyle choice.

Prediction #5:

Housing stocks break out because Washington decides the housing market can’t stay dead heading into midterms

Housing is the other 2026 setup I like … not because housing fundamentals are magically fixed, but because political incentives are powerful, and the housing market is one of the most visible sources of economic pain right now.

If the White House wants to juice sentiment going into midterms, housing is an obvious target. Not the only one … but one of the most emotionally potent.

And we’re already seeing credible smoke around the exact tools you mentioned.

There’s been meaningful reporting and discussion around the idea of 50-year mortgages and other structural adjustments, with the FHFA and its leadership tied to exploring these options (and, importantly, plenty of criticism from experts who view it as a band-aid that doesn’t solve supply).

That’s the point: these are the kinds of policies that can revive activity (transactions, mobility, credit availability) even if they don’t “solve affordability” in the purest sense.

And for housing stocks, activity is the whole ballgame.

If policy pushes:

• longer-duration mortgages,
• assumability / portability concepts,
• down-payment assistance,
• easier access to credit,
• or any incentive structure that reduces the “lock-in” effect,

…the market can thaw quickly.

In that scenario, the biggest equity beneficiaries are typically:

• housing transaction ecosystems (mortgage originators/servicers, title/closing, brokerages/portals),
• homebuilders (if demand rises while existing-home inventory stays tight),
• building products/materials (if starts tick up).

And the interesting irony is this: the same people who will complain these policies “inflate prices” are also the reason these policies get political traction — because the pain is immediate, visible, and widespread. So the pressure to “do something” rises.

Which means housing stocks get a 2026 narrative tailwind that investors are currently underpricing because the housing market feels dead.

Dead markets are where reflation trades are born.

The 2026 Stock Market in One Sentence

“The S&P rips higher on AI-led earnings and supportive policy — but it does it while violently shaking out anyone who expects a straight line.“

So the correct emotional posture for 2026 is not “calm confidence.”

It’s more like: helmet on, eyes open, dry powder ready, and don’t confuse volatility with the thesis breaking.

Because if these five predictions are right, 2026 won’t be a year where you win by being the smartest person in the room.

You’ll win by being the person who can stay bullish… while the market does its best impression of a mechanical bull.

If there’s one thing to take from these five predictions, it’s this: 2026 won’t reward the “perfect entry.” It’ll reward the investor who understands the map… and can keep their hands on the saddle while the market tries to throw them off.

That’s why I put together a short presentation that ties this whole outlook together — the why behind the 20%-plus S&P case, the where the AI boom turns brutally selective, and the how to position for the bottlenecks (power, cooling, networking, energy) and the next narrative vortex (space, housing, Washington’s “do something” incentives).

Because in this market, the biggest gains rarely come from reacting to headlines.

They come from seeing the pattern before the headline hits.

Watch the presentation now – and get the full game plan for 2026 while the opportunity is still forming, not after it’s already priced in.