Published: November 29, 2025
As Wall Street glides into the final stretch of 2025, the traditional “Santa Claus rally” seems to be arriving early – and with it, a wave of bullish forecasts that push the S&P 500 as high as 8,000 by the end of 2026. Major banks, star strategists and fresh economic outlooks all point to one big question for investors: will 2026 really be “just another year of the Roaring 2020s,” or are markets pricing in a little too much cheer?
Below is a deep dive into the latest calls on stocks and the global economy, based on coverage and themes highlighted today and in the last 48 hours by Fortune, Investing.com, and The Globe and Mail, along with other newly released data and forecasts.
An Early Santa Claus Rally Sets the Tone
The so‑called Santa Claus rally – the tendency for stocks to rise in the last days of December and the first trading sessions of January – appears to be starting ahead of schedule this year.
During the shortened Thanksgiving week, all three major U.S. equity benchmarks logged strong gains: the Dow Jones Industrial Average climbed more than 3%, the S&P 500 nearly 4%, and the Nasdaq Composite advanced over 4%, according to market commentary on the early holiday rebound. [1]
That upswing follows a sharp pullback earlier in November driven by:
- Fears that the artificial‑intelligence trade had become overheated
- Concerns the Federal Reserve might not deliver the scale of rate cuts investors had pencilled in
- A wave of bitcoin selling that spilled over into broader risk assets [2]
Now, some strategists are openly declaring “Santa’s back,” arguing that the seasonal tailwinds that usually help markets into year‑end are reasserting themselves. [3]
Historically, the Santa Claus rally is real but modest:
- Since 1945, the S&P 500 has averaged roughly 1.5% gains in December, making it one of the strongest months of the year. [4]
- Many studies focus specifically on the last five trading days of December and the first two of January, a seven‑session window that has produced positive returns about three‑quarters of the time. [5]
This year, the optimism is starting even earlier than usual — and it’s feeding directly into bold forecasts for 2026.
Wall Street’s New Obsession: S&P 500 at 7,500–8,000 in 2026
The biggest storyline in today’s outlook pieces is clear: how high can the S&P 500 go if the “AI + disinflation” narrative holds together?
Several major research houses have rolled out fresh 2026 targets that cluster in the same range:
- Deutsche Bank now projects the S&P 500 will reach 8,000 by the end of 2026, about 21% above its recent level around 6,603. The bank cites strong expected earnings growth and momentum in AI‑related investments, and it sees S&P 500 earnings per share (EPS) rising to $320. [6]
- HSBC is slightly less optimistic, targeting 7,500 for the index in 2026 but likewise pointing to AI‑driven profits and stable macro conditions as the key drivers. [7]
- According to Fortune’s coverage of year‑ahead market calls, JPMorgan also expects the S&P 500 around 7,500 by the end of 2026, with upside toward 8,000 if the Federal Reserve continues to cut interest rates more aggressively than currently priced in. [8]
Taken together, these forecasts imply:
- Double‑digit returns over the next year and a half, on top of strong gains already booked in 2024 and 2025
- A belief that the AI spending boom will translate into real earnings, not just higher valuations
- Confidence that central banks can manage a “soft landing” – slower but still positive growth and easing inflation
The risk, of course, is that too many investors start believing the same story at the same time. That’s where Ed Yardeni and The Globe and Mail’s broader macro focus add important nuance.
Ed Yardeni: 2026 as “Just Another Year of the Roaring 2020s”
In a widely discussed note summarized by Investing.com, veteran strategist Ed Yardeni argues that the global economy is heading into 2026 with the same powerful momentum that has defined what he calls the “Roaring 2020s.” [9]
Key points from Yardeni Research’s latest base‑case:
- Growth & Productivity
- Labour Market & AI
- The firm expects the unemployment rate to hover near 4.5%, higher than pre‑pandemic lows, in part because of the “rapid proliferation of AI” in the workplace. [12]
- Yardeni frames this as a reallocation story: jobs are being reshaped, not simply destroyed, as AI tools spread.
- Earnings & Markets
- Yardeni projects S&P 500 operating EPS rising from about $268 in 2025 to $310 in 2026, supporting further upside for stocks. [13]
- He maintains a long‑standing call that the S&P 500 could reach 10,000 by 2029, arguing that the current decade will echo past “roaring” periods of innovation and equity gains. [14]
- Policy & Inflation
- With inflation easing, Yardeni expects the Federal Reserve to cut rates only once in 2026, a sign that he sees the economy as strong enough to withstand relatively tight financial conditions. [15]
Underpinning this outlook is what Yardeni calls the “BRAIN Revolution” – a cluster of advances in biotechnology, robotics, artificial intelligence and nanotechnology that, collectively, are “doing what the brain can do, but faster and with greater focus.” [16]
In the short term, Yardeni is also linked to the Santa Claus narrative: recent commentary quoted in market coverage notes that “Santa’s back,” with the strategist eyeing the possibility of the S&P 500 reaching 7,000 before year‑end 2025, which would deliver roughly a 19% gain for the year. [17]
The message is clear: in Yardeni’s framework, 2026 isn’t a late‑cycle blow‑off – it’s simply the next chapter in a long‑running boom.
Beyond Wall Street Targets: The 2026 Economy in Three Fault Lines
While equity strategists focus on index-level targets, broader economic outlooks – including those promoted by The Globe and Mail under the banner “Economic Outlook 2026: trade, housing, artificial intelligence” – emphasise that the next year will be defined by three interconnected pressure points:
- Global trade under strain
- Housing markets wrestling with affordability and rates
- Artificial intelligence driving both productivity and disruption
1. Trade: Growth, but Much Slower
Global trade is no longer the reliable growth engine it once was. The World Trade Organization (WTO) has sharply downgraded its projections for 2026:
- After estimating merchandise trade volume growth of 2.4% in 2025, the WTO now expects just 0.5% growth in 2026, citing the delayed impact of new and higher tariffs, particularly from the U.S., and ongoing policy uncertainty. [18]
Separate analysis from the OECD points in the same direction:
- Global GDP growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 2.9% in 2026, with trade tensions and industrial policy frictions weighing on investment. [19]
For investors, this means:
- Export‑dependent sectors (heavy manufacturers, shipping, some commodities) may face a tougher earnings environment.
- At the same time, trade in AI‑related goods and services – from chips to cloud infrastructure – is a notable bright spot, offsetting some of the drag from more traditional categories. [20]
2. Housing: High Prices Meet High(ish) Rates
If trade is about cross‑border frictions, housing is where domestic pressures show up most clearly. The themes flagged in Canadian and global outlooks – tight supply, stubbornly high prices, and only gradual rate relief – are showing up across multiple new forecasts:
- In the United States, the National Association of REALTORS® (NAR) expects home prices to rise about 4% in 2026, with 2025 marking the real turning point for a recovery in sales. Supply remains constrained, and NAR explicitly says nationwide prices are in “no danger of declining.” [21]
- In Australia, a Reuters poll of analysts sees home prices rising about 7% in 2026, after an expected 8% increase in 2025. The main drivers: chronic housing shortages, rate cuts that have revived demand, and ongoing population growth. [22]
These data points echo the concerns highlighted in The Globe and Mail’s economic coverage:
- Housing is increasingly a structural bottleneck rather than a cyclical problem.
- Even if central banks trim rates further in 2026, affordability may not improve meaningfully if prices and rents keep outrunning wages.
For policymakers, this is a politically sensitive mix. For markets, it raises questions about:
- The durability of consumer spending in high‑rent, high‑mortgage economies
- The sustainability of housing‑linked sectors – construction, building materials, real‑estate services – if affordability pressures trigger regulatory or tax interventions
3. AI: Productivity Engine – and Job‑Market Shock
Artificial intelligence sits at the heart of almost every 2026 forecast – including the Globe and Mail’s focus on AI and the numerous global outlooks released in recent weeks.
On one side, AI is the growth engine that underpins bullish market calls:
- Asset‑managers like Franklin Templeton argue that innovation has become the “operating system” of the modern economy, with AI‑driven automation powering a more durable expansion and supporting earnings growth in leading sectors. [23]
- Vanguard and others emphasise that AI‑related investment will be a key factor determining whether growth beats or lags consensus expectations over the next five years. [24]
On the other side, AI is also a source of labour disruption:
- HP’s announcement this week that it plans to cut up to 6,000 jobs globally by 2028 as it leans harder into AI‑enabled efficiencies is just one example of how automation is reshaping corporate workforces. The company expects those changes to generate about $1 billion in annual savings by 2028. [25]
Yardeni’s own forecasts – robust productivity with a somewhat higher unemployment rate – capture this duality. The global economy may grow faster per worker, but the distribution of that growth, both across workers and across countries, is likely to become more uneven.
The Bullish 2026 Narrative vs. The Risks
Put together, today’s newsflow from Wall Street banks, macro institutions and high‑profile economists paints a broadly optimistic picture for 2026:
- Equities: Multiple houses see the S&P 500 between 7,500 and 8,000 by the end of 2026. [26]
- Growth: Yardeni, and some corporate‑sector outlooks, frame 2026 as part of a “Roaring 2020s” era driven by AI and other innovations. [27]
- Inflation & Policy: Many forecasts assume disinflation with mild rate cuts, not a re‑acceleration that would force central banks back into tightening mode. [28]
But more cautious voices remind investors that the road will not be smooth:
- Nouriel Roubini, writing this week on the U.S. outlook for 2026, lays out three possible paths, with outcomes ranging from a benign soft landing to a harder slowdown compounded by policy shocks and data uncertainty. [29]
- The WTO’s sharply lower trade forecast and OECD’s projection of slower global GDP growth both signal that geopolitics and tariffs remain significant downside risks. [30]
- Housing pressures and AI‑related job displacements could generate social and political flashpoints, potentially reshaping fiscal and regulatory policy in ways markets may not yet fully price in.
In other words: the bull case is powerful, but it is also conditional. It assumes:
- AI investment continues at a high pace without turning into an obvious bubble.
- Trade tensions and tariffs stop short of outright fragmentation or sanctions spirals.
- Central banks manage a narrow policy path – not so tight that they trigger recessions, not so loose that inflation re‑accelerates. [31]
What Investors Should Watch as 2025 Ends and 2026 Begins
For investors following today’s coverage on the Santa Claus rally, 2026 market targets and macro outlooks, several signposts will be crucial over the next 12 months:
- Fed and Central‑Bank Policy Paths
- How many cuts do the Fed, ECB and other key central banks actually deliver versus what futures markets price in?
- Do policymakers signal comfort with AI‑driven productivity gains, or do they worry more about asset bubbles and inequality?
- Earnings Revisions – Especially in AI Winners
- Do mega‑cap tech and semiconductor names continue to post earnings that justify AI‑driven valuations, or do margins get squeezed by rising input costs and competition? [32]
- Trade and Tariff Headlines
- Watch for new tariffs, export controls and trade agreements – especially in strategically sensitive areas like chips, data centres and green technologies. [33]
- Housing Indicators
- Sales volumes, construction starts and affordability metrics in the U.S., Canada, Europe and Asia will help show whether housing is stabilising or sliding deeper into crisis. [34]
- Labour‑Market and AI Adoption Data
- The balance between job creation in AI‑adjacent sectors and job losses from automation will shape politics as much as economics. High‑profile announcements like HP’s restructuring are likely just the beginning. [35]
Bottom Line: A “Roaring” 2026 – With Plenty of Cross‑Currents
From early Santa Claus rallies to 8,000‑point S&P 500 targets, today’s forecasts share a common theme: cautious optimism that the AI‑powered expansion can keep going.
- Bulls like Yardeni and several major banks see a world where productivity gains, steady consumer demand and moderate disinflation combine to produce another year of strong markets. [36]
- Macro analysts and institutions, including those spotlighted by The Globe and Mail, stress that this upside comes with meaningful risks around trade, housing and social cohesion. [37]
For investors, the message isn’t to blindly trust the Santa Claus rally or any specific 2026 target. It’s to recognise that:
AI, trade and housing will likely determine whether 2026 feels like a continuation of the Roaring 2020s – or the year the party finally gets interrupted.
And as always, these are broad market views, not personal investment advice. Portfolio decisions still need to factor in individual risk tolerance, time horizons and diversification needs.
References
1. www.tradealgo.com, 2. www.tradealgo.com, 3. www.tradealgo.com, 4. news.futunn.com, 5. www.cdwealth.com, 6. www.reuters.com, 7. www.reuters.com, 8. fortune.com, 9. www.investing.com, 10. www.investing.com, 11. www.investing.com, 12. www.investing.com, 13. www.investing.com, 14. www.investing.com, 15. www.investing.com, 16. www.investing.com, 17. www.tradealgo.com, 18. www.reuters.com, 19. www.oecd.org, 20. www.reuters.com, 21. www.nar.realtor, 22. www.reuters.com, 23. www.franklinresources.com, 24. www.nl.vanguard, 25. www.theguardian.com, 26. www.reuters.com, 27. www.investing.com, 28. www.oecd.org, 29. www.project-syndicate.org, 30. www.reuters.com, 31. www.spglobal.com, 32. www.reuters.com, 33. www.reuters.com, 34. www.nar.realtor, 35. www.theguardian.com, 36. www.investing.com, 37. www.iask.ca
