The optimism of U.S. equity strategists has made investors nervous. What are they worried about?

Wall Street analysts are known for optimism in their forecasts, but their positive outlook for 2026 is so unanimous that it has alarmed market participants. The spread of target benchmarks for U.S. stocks was the lowest in almost a decade. The synchronicity of forecasts is a reason to be wary: if everyone is betting on the same thing, the market may turn in the opposite direction to eliminate this bias, strategists warn.

According to Bloomberg, the annual targets of the largest investment banks and brokerage firms for the benchmark S&P 500 stock index are now clustered most tightly in almost 10 years: the difference between the highest forecast for the end of 2026 (8,100 points from Oppenheimer) and the lowest (7,000 points from Stifel) is only 16%. Despite high inflation and rising unemployment in the U.S., as well as doubts about the justification of Silicon Valley giants' spending on artificial intelligence, strategists on average expect U.S. stocks to rally 11% next year - and that's after three consecutive years of double-digit growth, the agency notes.

This crowding of forecasts makes investors fear that positive expectations are already fully factored into quotes, and this makes the market vulnerable. Steve Sosnick, chief strategist at Interactive Brokers, said, "If everyone expects the same thing, by definition, it's already built into market prices - especially when the rationale behind consensus forecasts is so often built on a similar base: lower interest rates, tax cuts and a continued AI boom." According to Roundhill Financial's Dave Mazza, when everyone in the market is "on the same side of the boat," it doesn't necessarily take a recession to start turbulence - a weak corporate report, unexpected decisions from the authorities or simply the fact that investors have left themselves no margin for error in their bets will suffice.

The main U.S. index S&P 500 ended trading on December 22 at 6878.49 points. Thus, the most optimistic forecast from Oppenheimer assumes the index growth in 2026 by 18% from the current level, and the most pessimistic from Stifel - only by 1.8%.

Publishing annual forecasts for the S&P 500 is a long-standing Wall Street practice, but these predictions are notorious for being consistently wrong. The strategists' targets are usually two months behind the actual performance of the index, Piper Sandler calculated. According to Michael Kantrowitz, the bank's chief investment strategist, strategists use targets only as a tentative way to indicate whether they are bullish or bearish. The market itself serves as a leading indicator for forecasts, not forecasts for the market, the economist says.

This article was AI-translated and verified by a human editor