US Market Outlook 2026

Asset managers and investment banks enter 2026 with a relatively positive outlook for the U.S. economy, though they also point to persistent uncertainties. Most forecasts expect moderate growth supported by resilient consumer demand, ongoing corporate investment and early productivity gains from AI. At the same time, the macro environment for the U.S. market remains complex: inflation is easing but not fully tamed, financial conditions remain restrictive, and policy dynamics could shift as the year unfolds. 

According to the IMF, the United States will be the fastest-growing advanced economy in 2026, forecasting 2.1% GDP growth. Bank of America is similarly upbeat, expecting 2.4% expansion: “The U.S. economy is firing on all cylinders,” says Joe Quinlan, Head of Market Strategy for the CIO. Goldman Sachs Research also expects momentum to improve, projecting 2.0–2.5% growth as the drag from tariffs fades and easier financial conditions combine with tax cuts to support activity. 

Others are more measured. The OECD sees U.S. growth slowing to 2.0% in 2025 and 1.7% in 2026. Morgan Stanley expects the economy to lose steam in the first half of 2026 before reaccelerating later in the year, resulting in 1.8% real GDP growth overall. 

US Market Outlook: Equities

Asset managers generally expect another year of strength for U.S. equities in 2026, underpinned by resilient economic activity, solid earnings and powerful structural trends such as AI. Some, including Deutsche Bank, see room for the S&P 500 to climb toward 8,000 as investment momentum remains strong and fiscal incentives such as the so-called One Big Beautiful Bill Act support corporate spending. “Rapid AI investment and adoption will continue to dominate market sentiment,” Deutsche Bank strategists write in their 2026 global outlook. 

Morgan Stanley also anticipates U.S. equities will lead global markets in 2026, finishing at 7,800 year-end. The firm points to a supportive policy backdrop, expected rate cuts, roughly $129 bn in tax relief from the One Big Beautiful Bill Act, stronger operating leverage, recovering pricing power and efficiency gains linked to AI adoption. “There will be some bumps along the way, but we believe that the bull market is intact,” says Serena Tang, Morgan Stanley’s Chief Global Cross-Asset Strategist. 

Bank of America highlights the strength of corporate balance sheets as another key driver. “Corporations have lower debt than they have traditionally had, and that means much of the current boom in capital expenditures has been able to fuel itself with cash,” notes Chris Hyzy, CIO of Merrill and Bank of America Private Bank. As long as employment holds up, Hyzy argues, demand should remain firm and support earnings momentum. 

However, there are several factors warranting caution. Persistent geopolitical tensions, policy uncertainty around the U.S. midterm elections, or potential consumer fatigue as excess savings dwindle. 

Auritro Kundu, Portfolio Manager, at AGF Investments also sees stretched valuations in parts of mega-cap technology. “There is no getting around the fact that some sectors, especially mega-cap technology, are over-owned, which raises the risk of valuation compression,” he notes. 

US Market Outlook: Bonds

Expectations for U.S. bonds in 2026 are cautiously optimistic, but not without hurdles. 

“2025 was a historically strong year for bond market performance, but we expect more-muted total return prospects for bonds in 2026,” says Thomas Garretson, senior portfolio strategist, Fixed Income Strategies with RBC Wealth Management. 

Garretson notes that the exceptional gains in 2025 were driven largely by falling yields, which boosted prices and lifted the Bloomberg U.S. Aggregate Bond Index to one of its strongest annual returns in decades. Looking ahead, RBC expects a very different backdrop: only limited Fed rate cuts, steady but unremarkable economic growth and inflation that remains above target. Together, these factors point to slightly higher Treasury yields by the end of 2026—RBC sees the 10-year rising to 4.55% from about 4.06% today. 

Columbia Threadneedle Investments expects the interplay between a softening labour market and still-resilient economic growth to shape the direction of U.S. bonds in 2026. “The Fed’s pre-emptive cuts, stable macroeconomic backdrop and healthy demand for fixed income set the stage for constructive returns. Yet vigilance is warranted as labour market stress and credit events could become more pronounced. By focusing on duration, yield and diversification, investors can position portfolios to weather volatility and capture opportunity in a changing landscape,” says Gene Tannuzzo, Global Head of Fixed Income.

Looking at credit markets, many managers also expect AI-related financing to be a defining theme. Morgan Stanley notes that a surge in tech-sector debt issuance could result in wider U.S. investment grade spreads, while high-yield bonds may fare better, as they are less exposed to this wave of AI-driven supply.

“While credit fundamentals should hold up, with defaults remaining around current levels, spreads in investment grade as well as data center asset-backed securities (ABS) will likely widen given the magnitude of issuance to come,” Morgan Stanley’s Tang notes.