Wall Street predicts that the S&P 500 will reach 7,580 by the end of 2026, expecting a 14% increase in earnings per share (EPS). This growth is backed by US President Trump’s push for lower interest rates, stimulus payments from tariffs, and sizable tax refunds. A survey from BlackRock reveals that 59% of participants believe risk assets will continue to bring returns in 2026. Reports from FXStreet show predictions between 7,200 and 8,100, with an average estimate of 7,580, reflecting an 11% rise from 6,820.

Effects Of Trump’s Policies

In 2025, Trump’s policies caused the S&P 500 to fluctuate, initially dropping 17% year-to-date due to tariffs. However, the index bounced back, achieving seven months of gains and a 15% increase year-to-date. The market is optimistic about 2026, with Goldman Sachs forecasting US GDP growth of 2% to 2.25%. The Federal Reserve reduced interest rates by 75 basis points in 2025 and may cut them further by 50 basis points in 2026. Trump intends to add more stimulus and tax cuts for 2026, which may include distributing tariff stimulus checks. Companies will benefit from a 100% bonus depreciation policy that encourages increased spending on AI. The S&P 500 is expected to gain from technical factors and earnings growth. Companies like Adobe, UnitedHealth, Newmont, Marvell, and Netflix are seen as strong stock picks for the year ahead.

Positioning For Upside

With the S&P 500 likely to rise 11% to 7,580 next year, we should prepare for more growth in the coming weeks. Historically, the last five trading days of December and the first two of January show positive returns, a period known as the Santa Claus Rally. Since 1950, this time frame has led to an average gain of 1.3% for the S&P 500, making it a great time to start bullish trades. A simple strategy is to buy call options on the SPX or SPY with expirations in March or June 2026. Given the positive outlook, strike prices around 7,000 to 7,200 would enable significant participation in the expected rally. Alternatively, selling out-of-the-money put spreads can provide income while reflecting our belief that strong support exists near the 6,550 level. The Federal Reserve’s accommodating stance is a strong advantage for our plan. After three interest rate cuts in 2025, last week’s Fed meeting minutes indicated they are open to further cuts in early 2026. History shows that when the Fed eases policy while the market is near its peak, stocks usually perform well in the following year. Political factors also appear favorable for early 2026. Recent discussions in Congress suggest a bill for tariff stimulus checks may be voted on by late January, which could boost consumer spending. Coupled with larger tax refunds from a new tax bill, this creates a strong incentive to invest in stocks during the first quarter. While we maintain a positive outlook, we remember the significant volatility early in 2025 due to tariffs. Last week’s jobless claims reported at 245,000, easing concerns about a swift economic slowdown, but risks still exist. Using defined-risk trades like call spreads is a smart way to capture potential gains while protecting against sudden downturns. We can also target specific sectors poised to benefit from current conditions. Call options on gold miners like Newmont (NEM) are appealing, as central bank purchases have driven gold prices to record highs, with many analysts predicting a rise to $5,000 per ounce. Additionally, the AI boom, bolstered by the 100% bonus depreciation, makes call options on semiconductor companies like Marvell Technology (MRVL) attractive. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now