Bank of America forecasts that the strong rally in the S & P 500 index will fade in 2026

After three consecutive years of double-digit returns, the US stock market has limited scope to offer excess returns in 2026, according to Bank of America. The bank predicts that the S & P 500 is likely to close around 7,100 in December next year, which is only about 4% above its closing price on Tuesday (December 2). While US companies are expected to post double-digit earnings growth, stock market price returns will tend to be flat. Savita Subramanian, head of equity and quantitative strategy, sees risks, but does not expect a crash; current investors have lower allocations to stocks compared to 2000, earnings growth underpins returns, and less extreme levels of enthusiasm for speculative stocks.