What will the stock market do in 2026? Here's why AI will dominate
- - What will the stock market do in 2026? Here's why AI will dominate
Andrea Riquier, USA TODAY December 18, 2025 at 7:26 PM
1
As 2025 comes to an end, the economy seems stable, the S&P 500 is up more than 15% so far this year, and inflation is relatively tame. Yet Americans have the kind of gloomy views about inflation, politics, and the job market that are normally only seen during recessions.
It’s a good reminder that there can be a disconnect between the big picture and individual American wallets. But with most strategists forecasting more of the same for 2026, it’s also an opportunity to dig into the large-scale drivers of what’s expected to be a relatively healthy economy and stock market.
"We are constructive on 2026," said Rob Haworth, senior investment strategy director for U.S. Bank. "There are risks we have to watch, but we think that this is a market and an economy that can repeat the successes we've seen over the last couple of years."
A police officer walks near flames as they scorch grass and trees at 220th and Triple X Road in Luther, Okla., March 14, 2025. Almost 300 houses and structures were destroyed by the wildfires that burned across the state and sent some Oklahomans fleeing with only the clothes on their backs, Gov. Kevin Stitt said.
" data-src=https://s.yimg.com/ny/api/res/1.2/ssDc5NyDy38CJX38o4J2Rw--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/d6e79ab2cbd62f6ba77435353b2227c8 class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
A police officer walks near flames as they scorch grass and trees at 220th and Triple X Road in Luther, Okla., March 14, 2025. Almost 300 houses and structures were destroyed by the wildfires that burned across the state and sent some Oklahomans fleeing with only the clothes on their backs, Gov. Kevin Stitt said.
">A police officer walks near flames as they scorch grass and trees at 220th and Triple X Road in Luther, Okla., March 14, 2025. Almost 300 houses and structures were destroyed by the wildfires that burned across the state and sent some Oklahomans fleeing with only the clothes on their backs, Gov. Kevin Stitt said.
" src=https://s.yimg.com/ny/api/res/1.2/ssDc5NyDy38CJX38o4J2Rw--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/d6e79ab2cbd62f6ba77435353b2227c8 class=caas-img>
memorial Mass for Pope Francis at Cathedral of the Incarnation in Nashville, Tenn., April 28, 2025. Pope Francis, 88, a reformer who sought to make the Catholic Church more inclusive and clashed with world leaders over the rights of immigrants, died Easter Monday following a lengthy bout of double pneumonia.
" style=padding-bottom:56%>The dames of the Equestrian Order of the Holy Sepulcher of Jerusalem pray during an official diocesan memorial Mass for Pope Francis at Cathedral of the Incarnation in Nashville, Tenn., April 28, 2025. Pope Francis, 88, a reformer who sought to make the Catholic Church more inclusive and clashed with world leaders over the rights of immigrants, died Easter Monday following a lengthy bout of double pneumonia.
" data-src=https://s.yimg.com/ny/api/res/1.2/.c9_iGFePcz5ItN.YYTKyw--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD0xMjM2/https://media.zenfs.com/en/usa_today_slideshows_242/b233687421790569f34b8e212b597397 class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
The dames of the Equestrian Order of the Holy Sepulcher of Jerusalem pray during an official diocesan memorial Mass for Pope Francis at Cathedral of the Incarnation in Nashville, Tenn., April 28, 2025. Pope Francis, 88, a reformer who sought to make the Catholic Church more inclusive and clashed with world leaders over the rights of immigrants, died Easter Monday following a lengthy bout of double pneumonia.
">The dames of the Equestrian Order of the Holy Sepulcher of Jerusalem pray during an official diocesan memorial Mass for Pope Francis at Cathedral of the Incarnation in Nashville, Tenn., April 28, 2025. Pope Francis, 88, a reformer who sought to make the Catholic Church more inclusive and clashed with world leaders over the rights of immigrants, died Easter Monday following a lengthy bout of double pneumonia.
" src=https://s.yimg.com/ny/api/res/1.2/.c9_iGFePcz5ItN.YYTKyw--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD0xMjM2/https://media.zenfs.com/en/usa_today_slideshows_242/b233687421790569f34b8e212b597397 class=caas-img>
A Breonna Taylor supporter was led away in handcuffs as a group protested the DOJ's one-day sentence recommendation for former LMPD detective Brett Hankison as he was in court at the U.S. Federal Courthouse for sentencing in Louisville, Ky., July 21, 2025.
" data-src=https://s.yimg.com/ny/api/res/1.2/7DFqd2GE9LAfxnQmsaenTA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04NTc-/https://media.zenfs.com/en/usa_today_slideshows_242/054cfaaf82c8133283bbe17f9a935155 class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
A Breonna Taylor supporter was led away in handcuffs as a group protested the DOJ's one-day sentence recommendation for former LMPD detective Brett Hankison as he was in court at the U.S. Federal Courthouse for sentencing in Louisville, Ky., July 21, 2025.
">A Breonna Taylor supporter was led away in handcuffs as a group protested the DOJ's one-day sentence recommendation for former LMPD detective Brett Hankison as he was in court at the U.S. Federal Courthouse for sentencing in Louisville, Ky., July 21, 2025.
" src=https://s.yimg.com/ny/api/res/1.2/7DFqd2GE9LAfxnQmsaenTA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04NTc-/https://media.zenfs.com/en/usa_today_slideshows_242/054cfaaf82c8133283bbe17f9a935155 class=caas-img>
USA TODAY investigation found that at least 158 children and teens have died on dirt bikes and at motocross tracks since 2000, more than six per year. That makes it the deadliest sport for young people – roughly seven times greater than tackle football. Nathalie Henderson's aunt, Ashlee Sokalski, died in a motocross accident during a race in 2010. Her family members continue to ride but no longer compete.
" style=padding-bottom:56%>Thomas Henderson, 37, helps his daughter, Nathalie Henderson, 4, put on her helmet before riding her dirt bike at their home in St. Clair, Mich., Oct. 11, 2025. A USA TODAY investigation found that at least 158 children and teens have died on dirt bikes and at motocross tracks since 2000, more than six per year. That makes it the deadliest sport for young people – roughly seven times greater than tackle football. Nathalie Henderson's aunt, Ashlee Sokalski, died in a motocross accident during a race in 2010. Her family members continue to ride but no longer compete.
" data-src=https://s.yimg.com/ny/api/res/1.2/oC51Ua_5tMOkultlSupRIw--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/18783cafc62bb16618ae9ba8357ad0df class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
Thomas Henderson, 37, helps his daughter, Nathalie Henderson, 4, put on her helmet before riding her dirt bike at their home in St. Clair, Mich., Oct. 11, 2025. A USA TODAY investigation found that at least 158 children and teens have died on dirt bikes and at motocross tracks since 2000, more than six per year. That makes it the deadliest sport for young people – roughly seven times greater than tackle football. Nathalie Henderson's aunt, Ashlee Sokalski, died in a motocross accident during a race in 2010. Her family members continue to ride but no longer compete.
">Thomas Henderson, 37, helps his daughter, Nathalie Henderson, 4, put on her helmet before riding her dirt bike at their home in St. Clair, Mich., Oct. 11, 2025. A USA TODAY investigation found that at least 158 children and teens have died on dirt bikes and at motocross tracks since 2000, more than six per year. That makes it the deadliest sport for young people – roughly seven times greater than tackle football. Nathalie Henderson's aunt, Ashlee Sokalski, died in a motocross accident during a race in 2010. Her family members continue to ride but no longer compete.
" src=https://s.yimg.com/ny/api/res/1.2/oC51Ua_5tMOkultlSupRIw--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/18783cafc62bb16618ae9ba8357ad0df class=caas-img>
Hulk Hogan takes photographs with fans during a meet-and-greet while promoting his new beer, Real American Beer, at Homerun Liquors on Feb. 20, 2025, in Martin County, Fla. Hogan, who launched his beer in June, died at the age of 71 in July 2025.
" data-src=https://s.yimg.com/ny/api/res/1.2/EuCzn2zokVafuEwwBslQsQ--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04OTk-/https://media.zenfs.com/en/usa_today_slideshows_242/8d77632440940349fe5b320e124d3080 class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
Hulk Hogan takes photographs with fans during a meet-and-greet while promoting his new beer, Real American Beer, at Homerun Liquors on Feb. 20, 2025, in Martin County, Fla. Hogan, who launched his beer in June, died at the age of 71 in July 2025.
">Hulk Hogan takes photographs with fans during a meet-and-greet while promoting his new beer, Real American Beer, at Homerun Liquors on Feb. 20, 2025, in Martin County, Fla. Hogan, who launched his beer in June, died at the age of 71 in July 2025.
" src=https://s.yimg.com/ny/api/res/1.2/EuCzn2zokVafuEwwBslQsQ--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04OTk-/https://media.zenfs.com/en/usa_today_slideshows_242/8d77632440940349fe5b320e124d3080 class=caas-img>Alabama's Paityn Walker competes on the bars during the meet against North Carolina at Coleman Coliseum in Tuscaloosa, Ala., Jan. 10, 2025.
" data-src=https://s.yimg.com/ny/api/res/1.2/97UGdOubdPvoVCkag4LvOg--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD02MTk-/https://media.zenfs.com/en/usa_today_slideshows_242/371cd81b58e4b9cac48ad2fdfb157c6b class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
Alabama's Paityn Walker competes on the bars during the meet against North Carolina at Coleman Coliseum in Tuscaloosa, Ala., Jan. 10, 2025.
">Alabama's Paityn Walker competes on the bars during the meet against North Carolina at Coleman Coliseum in Tuscaloosa, Ala., Jan. 10, 2025.
" src=https://s.yimg.com/ny/api/res/1.2/97UGdOubdPvoVCkag4LvOg--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD02MTk-/https://media.zenfs.com/en/usa_today_slideshows_242/371cd81b58e4b9cac48ad2fdfb157c6b class=caas-img>
Kelsea Ballerini arrives on the red carpet for the 59th Annual CMA Awards at Music City Center in Nashville, Tenn., Nov. 19, 2025.
" data-src=https://s.yimg.com/ny/api/res/1.2/36BfRwmq4IorOKeQ8VkXvA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/1883c57d42b0d8fd04452c3fc380cd39 class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
Kelsea Ballerini arrives on the red carpet for the 59th Annual CMA Awards at Music City Center in Nashville, Tenn., Nov. 19, 2025.
">Kelsea Ballerini arrives on the red carpet for the 59th Annual CMA Awards at Music City Center in Nashville, Tenn., Nov. 19, 2025.
" src=https://s.yimg.com/ny/api/res/1.2/36BfRwmq4IorOKeQ8VkXvA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/1883c57d42b0d8fd04452c3fc380cd39 class=caas-img>
Brayla Rigney, 5, of Camden, Tenn., holds a candle in remembrance of her siblings, 7-month-old Rileigh and Ryan Rigney., in Waverly, Tenn., Saturday, Aug. 23, 2025. A flash flood took the lives of 20 Waverly area residents on Aug. 21, 2021.
" data-src=https://s.yimg.com/ny/api/res/1.2/mpFvlE7.CxDFhVWf1APN6g--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD0xODc1/https://media.zenfs.com/en/usa_today_slideshows_242/7759608b82c4bbbb008f5b6cacb0fefe class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
Brayla Rigney, 5, of Camden, Tenn., holds a candle in remembrance of her siblings, 7-month-old Rileigh and Ryan Rigney., in Waverly, Tenn., Saturday, Aug. 23, 2025. A flash flood took the lives of 20 Waverly area residents on Aug. 21, 2021.
">Brayla Rigney, 5, of Camden, Tenn., holds a candle in remembrance of her siblings, 7-month-old Rileigh and Ryan Rigney., in Waverly, Tenn., Saturday, Aug. 23, 2025. A flash flood took the lives of 20 Waverly area residents on Aug. 21, 2021.
" src=https://s.yimg.com/ny/api/res/1.2/mpFvlE7.CxDFhVWf1APN6g--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD0xODc1/https://media.zenfs.com/en/usa_today_slideshows_242/7759608b82c4bbbb008f5b6cacb0fefe class=caas-img>
Indiana Fever forward Yvonne Ejim poses for a photo April 30, 2025, during the Indiana Fever media day at Gainbridge Fieldhouse in Indianapolis, Ind.
" data-src=https://s.yimg.com/ny/api/res/1.2/hQkQXttBNoTk8cPxU_Hn2g--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/bd098622735566acc8e99d77c3ec15f9 class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
Indiana Fever forward Yvonne Ejim poses for a photo April 30, 2025, during the Indiana Fever media day at Gainbridge Fieldhouse in Indianapolis, Ind.
">Indiana Fever forward Yvonne Ejim poses for a photo April 30, 2025, during the Indiana Fever media day at Gainbridge Fieldhouse in Indianapolis, Ind.
" src=https://s.yimg.com/ny/api/res/1.2/hQkQXttBNoTk8cPxU_Hn2g--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/bd098622735566acc8e99d77c3ec15f9 class=caas-img>
Tula-Tu sticks close to her mom, Rose-Tu,, March 6, 2025 in Portland, Ore. The Asian elephant calf was born in February.
" data-src=https://s.yimg.com/ny/api/res/1.2/99agsztYabboQcMPdD7teA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/d38c06fc91ff7796572003c5b70a9eef class=caas-img data-headline="See the heartache, grit and joy in USA TODAY's Pictures of the Year" data-caption="
Tula-Tu sticks close to her mom, Rose-Tu,, March 6, 2025 in Portland, Ore. The Asian elephant calf was born in February.
">Tula-Tu sticks close to her mom, Rose-Tu,, March 6, 2025 in Portland, Ore. The Asian elephant calf was born in February.
" src=https://s.yimg.com/ny/api/res/1.2/99agsztYabboQcMPdD7teA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD04Mjg-/https://media.zenfs.com/en/usa_today_slideshows_242/d38c06fc91ff7796572003c5b70a9eef class=caas-img>
1 / 95See the heartache, grit and joy in USA TODAY's Pictures of the Year
A police officer walks near flames as they scorch grass and trees at 220th and Triple X Road in Luther, Okla., March 14, 2025. Almost 300 houses and structures were destroyed by the wildfires that burned across the state and sent some Oklahomans fleeing with only the clothes on their backs, Gov. Kevin Stitt said.
Will the stock market go up in 2026?
Most analysts do expect the stock market to perform well next year, bolstered by spending on artificial intelligence technology, Federal Reserve rate cuts, and tax breaks.
Strategists at Deutsche Bank expect the S&P 500 to end 2026 at 8,000, which would mean a nearly 18% increase over the index’s closing level of about 6,737 on Dec. 17. Investment bank Morgan Stanley sees a 14% increase. LPL Financial’s forecast of a level between 7,300 and 7,400 translates to only about an 8% increase.
Infrastructure spending, like the data center seen here, is expected to propel the stock market higher in 2026.What will AI do to the economy?
Just like average Americans, professional investors are keeping a wary eye on AI.
"This phase of the investment cycle – which is likely to play out over the next three to five years – will be a double-edged sword. On one hand, it will spur the economy to swap out old tools for new ones," wrote analysts at Vanguard. "But it will also present an increasingly narrow investment landscape, where investors will find it difficult to avoid risk."
What does "narrow" mean? As shown in the chart below, from Apollo Chief Economist Torsten Slok, most of the stock market’s performance over the past few years has been concentrated in seven high-growth stocks: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla.
Many analysts see such concentrated success as worrisome. But Deutsche Bank’s team says it expects earnings growth for tech stocks to moderate, even as growth for the rest of the S&P 500 likely picks up.
What kinds of stocks will do well in 2026?
Investors have recently started to pay more attention to industrial-sector companies like General Electric and RTX Corp. (the company formerly known as Raytheon) which will benefit from the AI boom, U.S. Bank’s Haworth told USA TODAY. That’s a sign of a healthier market, he believes.
Does the US have a 'K-shaped economy'? What it means for you.
Truist Wealth recently upgraded the sector, which can be invested in via the State Street Industrial Select Sector SPDR exchange-traded fund (ETF) with the ticker XLI. Truist also remains bullish on the information technology sector, which features the Mag 7 heavyweights and can be tracked through State Street's XLK ETF.
Goldman Sachs’ strategist team, meanwhile, takes an even broader view, recommending that investors diversify their holdings outside of the U.S, particularly to emerging markets like Brazil, India and China, as well as across sectors.
Finally, another piece of advice Goldman gives, to "stay invested," is a reminder that financial markets can be jumpy. Stocks and bonds both plummeted when the White House announced its tariff regime in April but recovered soon after. Investors who stay the course generally do better than those who try to time the market.
This article originally appeared on USA TODAY: What will the stock market do in 2026? AI will dominate
Source: “AOL Money”
