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S&P 500 Heads for 'Boring' Year Amid Tech Pause
24 Dec
Summary
- S&P 500 expected to rise 3-5% in 2026, ending in the 7,200s.
- Mega-cap tech stocks may pause due to investor concerns over AI spending.
- Industrials, transports, and financials are predicted to lead market next year.
The S&P 500 is projected to experience a "boring, normal year" in 2026, a significant shift from its recent double-digit gains. Jay Woods, chief strategist at Freedom Capital Markets, anticipates a 3% to 5% increase for the index, potentially closing 2026 in the low 7,200s. This forecast suggests a continuation of the bull market, albeit without the rapid acceleration seen in previous years.
This anticipated slowdown is partly attributed to a potential pause in big tech stocks, which have been the primary drivers of market performance. Concerns are mounting over the return on investment for the substantial $400 billion being spent on AI infrastructure. As hyperscalers like Microsoft and Alphabet face scrutiny, their significant market capitalization could weigh on the broader index.
In contrast, Woods foresees a market leadership transition, with sectors such as industrials, transportation, and financials expected to gain prominence. These more stable sectors, characterized by "slow, steady growth," are likely to be favored by investors seeking more predictable returns as the tech sector navigates its current challenges.
