Wall Street's most accurate forecaster predicted a 12% rise in the S&P 500 by the end of 2026

One of Wall Street's most accurate forecasters, Fundstrat Global Advisors co-founder Tom Lee expects the S&P 500 Index to reach 7,700 points by the end of 2026. This was stated by Lee in a video commentary posted on the Vimeo platform. This was brought to the attention of MarketWatch. Lee's estimate is nearly 12% above the index's closing level on Wednesday, December 10.

"We think the market will have to go through a wave of skepticism and adaptation to a new Fed in 2026 - together, these factors could add about 10% to growth," Lee said, noting that a revamped Fed is unlikely to want to stop the bull market. In May 2026, the term of current Fed Chairman Jerome Powell will end.

At the same time, the most optimistic forecast at the moment remains the assessment of Oppenheimer - 8100 points, noted MarketWatch. This estimate assumes growth of the index by almost 18%.

Investors' main concern now is whether the market can continue to rise after three straight years of gains of more than 20%, MarketWatch writes. However, Lee reminded investors, since 1928, the index has added an average of 12% in the fourth year after such series of gains - which he said is "a very good result." Since the start of 2025, the S&P 500 has already added about 17%.

Next year will follow a similar pattern to 2025, with periods of volatility during the year followed by a rally towards the end, Lee believes. According to him, this is how the situation has historically developed after three consecutive years of growth of 20% or more.

Additional reasons for market participants to worry are valuations of AI companies, a possible adjustment period to a new Fed chair, concerns about social tensions and the likelihood that the U.S. Supreme Court will declare U.S. duties illegal, Lee added. But markets haven't yet factored into prices that the Fed may take a softer stance next year, which would be an additional support factor for stocks, MarketWatch noted.

The main drivers of profits and economic growth in 2026, according to Lee, will be artificial intelligence and energy infrastructure, Wall Street's shift to blockchain (e.g., tokenization of stocks, loans and real estate), and domestic manufacturing.

Lee's favorite sectors for 2026 are technology, including AI, bitcoin and Ethereum, as well as sagging commodities, energy and financials. Fundstrat upgraded its recommendation on the commodities and energy sectors from Neutral to Overweight ("above market"), and downgraded the consumer durables sector from Overweight to Neutral.

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