①Analysts believe that Federal Reserve Chair Powell's statement was not as "hawkish" as analysts had expected. Moreover, with Trump's likely appointment of a more "dovish" replacement next year, the U.S. is poised to embrace a more accommodative monetary and fiscal stimulus.
②Wall Street investment banks such as Oppenheimer, UBS Group, and Goldman Sachs have issued high target prices for the S&P 500 Index in 2026, forecasting that sustained economic growth and Federal Reserve rate cuts will drive stock market gains.
Last week,$S&P 500 Index (.SPX.US)$and$Dow Jones Industrial Average (.DJI.US)$both reached all-time highs. Following the Federal Reserve's interest rate cut, Wall Street has become increasingly optimistic about the outlook for U.S. stocks in 2026.
This trend was further reinforced as although Fed Chair Powell’s remarks during last week’s policy meeting press conference appeared somewhat “hawkish,” many analysts believe that the Fed’s monetary policy stance is not as stringent as expected.
Is the Fed actually not so 'hawkish'?
Following last week’s announcement of the interest rate decision, Federal Reserve Chair Powell stated that due to data gaps and economic uncertainties, the Fed will shift to a wait-and-see mode after three rate cuts this year. However, he also noted that no one within the Fed currently considers raising rates as the baseline expectation.
Powell’s comments clearly came as a relief to many analysts.
“In fact, I think his (Powell’s) tone in the statement leaned somewhat ‘dovish.’ I didn’t find it particularly hawkish at all.” David Waddell, CEO of Waddell & Associates, said in an interview.
More importantly, Waddell pointed out that U.S. President Trump is expected to replace the Fed Chair by May next year, and whoever succeeds Powell can be almost certainly counted on to support lower interest rates.
“Trump will only replace him with a dove. So we are going to get lots of monetary stimulus. We’re also going to get lots of fiscal stimulus,” Waddell added.
Meanwhile, the Fed’s upward revision of the U.S. GDP forecast to 2.3% for 2026 likely implies higher revenues, better profit margins, and earnings growth. These expectations are driving Wall Street firms to issue bullish stock price targets.
Ed Yardeni, a senior strategist, also believes that the S&P 500 Index will reach 7,700 points. He recently increased the probability of his proposed 'Roaring 2020s' scenario to 60%, citing reasons such as tax benefits brought by the 'big and beautiful bill' and a technology boom driven by artificial intelligence.
Meanwhile, Oppenheimer set$S&P 500 Index (.SPX.US)$a target value of 8100 points for 2026, attributing shifts in monetary and fiscal policies as key drivers of corporate earnings.
John Stoltzfus, Chief Market Strategist at Oppenheimer, stated in an interview following the Federal Reserve's decision: 'This is definitely good for businesses and also beneficial for consumers. It will be reflected in the stock market.'
Wall Street investment banks are giving high target prices.
UBS Group shares the same optimistic view; its strategists have set the index target for 2026 at 7,700 points, citing 'continued economic growth, interest rate cuts by the Federal Reserve, and a significant increase in AI-related investment spending.'
Analysts at Goldman Sachs predict that earnings growth for the S&P 500 Index in 2026 will exceed 12%, which is slightly below Wall Street’s consensus expectation of 14%.
Currently, the top seven stocks in the S&P 500 Index (including$NVIDIA (NVDA.US)$、$Apple (AAPL.US)$、$Microsoft (MSFT.US)$、$Alphabet-A (GOOGL.US)$、$Amazon (AMZN.US)$、$Broadcom (AVGO.US)$and$Meta Platforms (META.US)$account for approximately one-quarter of the index's earnings. However, Goldman Sachs predicts that the breadth of U.S. stock earnings growth will expand in the future.
'We expect that accelerating economic growth and the diminishing impact of tariffs on profit margins will support earnings growth for the remaining 493 companies,' wrote Ben Snider of Goldman Sachs in a report last Thursday.
Strategists will also focus on positive consumer-driven factors entering the market next year, as Trump works to address the affordability crisis.
'A strong positive trend will emerge in the market next year,' said Victoria Fernandez, Chief Market Strategist at Crossmark Global Investments. However, she also cautioned investors against 'betting everything' on a single industry.
Investors may focus on 'secondary companies' in AI trading.
Last week, tech giants$Oracle (ORCL.US)$and chipmakers$Broadcom (AVGO.US)$Following the release of earnings reports, AI trading in the market has cooled somewhat. Although Fernandes remains optimistic about the sector, she advises investors to be 'selective' and focus on 'secondary' artificial intelligence companies.
Who will truly become an outstanding user of artificial intelligence? It is not just about who is creating all of this or who is building data centers—but rather, who will utilize artificial intelligence?” she offered as a direction for consideration.
Beyond the technology sector, Fernandez also recommends that investors focus on industries showing positive technological trends or sectors that have started to bottom out relative to the broader market. She believes specific growth opportunities will emerge in areas such as transportation, housing construction, healthcare, and energy.
I'm not saying you should invest across the board in these sectors,” Fernandez clarified. “I’m simply suggesting that you look for opportunities within these industries because that is where you will begin to see some growth.
Editor/melody