S&P 500 Nears New All-Time High: What Do Experts Predict?

Wall Street is experiencing calmer weeks, but never meaningless ones. The American S&P 500 index has spent the past few days in a tight range and ended the week up just 0.3%, slowing the strong two-week gain of 5.5%. The index closes only a quarter of a percent below its record close from October 28. The market is gradually getting back into rhythm after a challenging November, with sector rotation supporting stability and limiting volatility—the VIX index is moving toward levels around 15 for the first time in nearly six weeks.

Beneath the apparent calm, however, a clearer message is emerging. The market is beginning to position itself for a new acceleration in the economy—a scenario often seen in the early phase of a cycle, when the Federal Reserve shifts toward a more accommodative monetary policy.

Against this backdrop, the Dow Jones Transportation Average rises by 3.6%, regional banks add 2.7%, and the SPDR Retail ETF climbs 2.2%. The Russell 2000 index hits a new record high—a result partly driven by more speculative companies, but also reflecting expectations for renewed economic activity and another rate cut from the Fed next week.

Cyclical sectors continue to outperform defensive ones. Analysis by Goldman Sachs shows that this behavior aligns with market expectations for stronger U.S. real GDP growth. Still, it serves as a reminder that the market rarely predicts the economic future flawlessly, even over a period of several months.

Investment banks are also entering the new year with optimism. More than a dozen major brokerage firms have already published their 2026 forecasts, with the average target for the S&P 500 around 7,600 points—a rise of nearly 11%. This is not an extremely aggressive forecast, but it is above the average for similar annual estimates. No firm predicts a decline or even a flat year. The consensus expects about 14% earnings growth, stable margins, and valuations maintained at roughly a 22.5x forward P/E.

Bank of America is taking a more cautious approach. Strategist Savita Subramanian forecasts a more moderate increase in the index—to around 7,100 points—expecting double-digit earnings growth but a 5–10% contraction in valuations. She notes that investments in artificial intelligence are likely to start delivering lower returns, and market liquidity will gradually weaken.

Meanwhile, the market is once again closely monitoring every move in long-term bond yields. This is important because, in a scenario of growth recovery, yields could rise to levels that put pressure on equities. The 10-year Treasury yield remains in a moderate range, but in recent days it has risen to around 4.14%—still not a problematic level, but approaching a key downward trendline.

Many valuation models also suggest that the starting point for new investments in the broad U.S. market is becoming increasingly demanding. Fidelity’s analysis shows that the expected five-year return from current levels often remains below the long-term average market growth of about 10% per year.

And yet, the market has for years defied such pessimistic arguments. Five years ago, the S&P 500 was already trading at over a 23x forward P/E, but since then the index has delivered nearly 15% average annual returns.

With an upcoming rate cut and a swift recovery from the recent 5% correction, the rule “Don’t fight the Fed and don’t fight the trend” remains valid. Historically, most bull markets entering their third year continue into the fourth. The S&P 500’s nearly 17% gain since the start of the year is entirely reasonable, given that international markets have added around 28%, while the Fed is heading toward a total of 175 basis points in cuts without a recession.

The market also gains additional resilience as the correlation with cryptocurrencies weakens—crypto assets remain near their lows, while equities have almost fully recouped the losses from the spring decline.

With 17 trading sessions left until year-end, the market gives few reasons for complaint, but it certainly leaves topics for reflection during quieter moments.