Every Wall Street Bank Sees S&P Gains in 2026, but My Prediction Is a Sure Thing
Twenty‑one firms predict the market will rise next year. While they may be right, there's a problem with these predictions.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
My concerns about a sell-the-news reaction to the Santa Claus rally period are gaining traction on Monday morning. The action is poor, with mega-cap technology and the Magnificent Seven leading to the downside. Small-caps are also struggling, pushing the number of declining stocks up to 60%.
We still have a few days left in the Santa Claus rally window, but the poor start will drive many active traders to the sidelines as they opt for a longer break. We will still see positioning and tax moves, but the action is too random to trade effectively.
This is the time of year when major Wall Street firms try to predict market performance for the year ahead. Although there is little respect for this annual exercise, they do it anyway because it is expected of them.
This year, every major Wall Street analyst is predicting the S&P 500 will rise in 2026. There are 21 positive predictions, and the average expected gain is 10%. Not so ironically, that is exactly what Wall Street has trained amateur investors to expect the market to return annually over the long term.
While this exercise is interesting and leads to good discussion, it is ultimately futile. The problem with these predictions is that they create a bias that undermines objectivity. No one likes to be wrong, and once a prediction is made, it often leads to data mining where you only consider information that supports your existing view.
Objectivity goes out the window. It may be a subtle nudge, but the process of committing to future results is a fast way to sabotage your trading discipline.
My prediction for 2026 is that there will be substantial rallies and ugly pullbacks. Volatility is the only market certainty because that is the nature of all markets. It is far better to hold an expectation of ups and downs than to speculate where things will ultimately end up 12 months from now. Markets may be higher or they may be lower, but the one sure thing is they will not arrive there in a straight line.
If you think about the market in those terms, you will be far better prepared to take action as conditions shift. I do not really care if the indexes gain or lose. I only care that there are ups and downs to trade. The more volatility there is, the more mispricing of individual stocks will occur, and that is where the great opportunity lies.
Wall Street predictions are interesting, but they are not going to make you any money. Stay focused on the inevitable ups and downs if you want to outperform.
At the time of publication, Rev Shark had no positions in any securities mentioned.
