NEW YORK–In a move that surprised many, Bank of America has lowered expectations for the S&P 500 index, forecasting only modest gains in 2026 after years of double-digit returns.
Analysts at BofA now expect the S&P 500 to finish 2026 around 7,100 — roughly 5% to 8% above current levels.
The bank cited a slowdown in share buybacks, rising corporate spending on artificial-intelligence infrastructure, and shrinking market liquidity as key factors constraining upside, according to Business Insider. Even though corporate earnings remain solid, BofA warned of what it called an “AI air pocket,” where lofty AI-driven expectations may not translate into broad gains.
Still, in its forecast the bank pointed to several potential tailwinds: ongoing capital expenditures, resilient consumer spending, a weakening dollar aiding exporters, and the possibility of several interest-rate cuts by the Federal Reserve during 2026 — all of which could support equity valuations.
Forecast Stands Out
As Reuters and other news outlets noted, BofA’s cautious call stands out among Wall Street projections. Other major firms are more bullish: for example, JPMorgan and UBS have forecast year-end 2026 targets of 7,500 or higher — implying double-digit gains over current levels.
BofA’s more restrained outlook reflects what the firm says is a shift in the market’s fuel: from easy liquidity and historic buybacks — to a new environment driven primarily by business investment, interest-rate dynamics and economic fundamentals, analysts said.
