The outlook for U.S. equities in 2026 remains constructive, according to a new forecast from Bank of America, which sees conditions supportive of another solid year for stocks. For wealth advisors and RIAs guiding clients through volatile markets, the bank’s analysis underscores the importance of staying invested, diversifying allocations, and identifying sectors positioned to benefit from broader economic trends.
Even with lingering concerns about the underlying strength of the U.S. economy, BofA’s strategists believe momentum will carry into 2026, supported by structural shifts in productivity and renewed business investment. The outlook comes as investors close out a turbulent but rewarding year: the S&P 500 has climbed 13% year-to-date, overcoming a steep April drawdown sparked by tariff shocks and rebounding to fresh record highs by the fall.
Savita Subramanian, head of U.S. equity and quantitative strategy at BofA, framed the forecast in historical context. “Our outlook harkens back to the 1980s and 1990s: productivity growth (it’s happening, even without AI) and business investment,” she wrote in a recent note. “A pickup in business investment after decades of underspend could be enough to drive strong GDP and EPS gains. AI is gravy.”
For advisors, the message is clear: secular tailwinds are building, and while risks remain, the opportunity set is broadening beyond the handful of mega-cap names that have dominated returns over the past two years. Below are BofA’s three central predictions for 2026, along with insights on what they could mean for client portfolios.
1. The S&P 500 Could Gain Another 8%
BofA expects the S&P 500 to advance toward 7,200 over the next 12 months, implying roughly an 8% gain from current levels. The bank’s updated price target reflects inputs from its Fair Value Model, Sell Side Indicator, and other valuation frameworks.
That forecast is consistent with broader Street expectations. Morgan Stanley has also called for a 7,200 target by mid-2026, while Goldman Sachs has set a more conservative goal of 6,900.
For RIAs, this suggests a supportive environment for maintaining equity exposure while emphasizing discipline around rebalancing. The rally has been punctuated by volatility, and clients may need guidance to avoid chasing performance or overconcentrating in sectors that already reflect optimistic assumptions.
Key takeaway: Advisors can position portfolios to capture upside, but allocation discipline and careful valuation awareness remain essential.
2. Corporate Earnings Should Remain Robust
Corporate America is expected to deliver another year of strong earnings growth. BofA strategists estimate earnings for the S&P 500 could expand about 12% in 2026, with their Earnings Surprise model recently shifting into positive territory.
Several structural and cyclical factors support this outlook:
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Improved productivity and investment: Capital expenditures delayed earlier in 2025 are now resuming, which could lift efficiency and margins.
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Looser monetary policy: A more accommodative Fed stance eases financing costs and supports both consumer demand and business investment.
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Shifting consumer trends: Spending patterns are normalizing, with goods purchases stabilizing relative to services, creating a more balanced demand environment.
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Easing trade uncertainty: The potential for additional trade deals reduces one of the key macro overhangs of recent years.
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Profits-positive corporate trends: Wage inflation is cooling, cost discipline is increasing, and firms are leveraging digital efficiencies to manage expenses.
For advisors, resilient earnings provide a foundation for client confidence in equities. While volatility is likely, consistent profit growth can support long-term compounding. A focus on sectors where productivity gains and cost discipline intersect could add incremental alpha.
Key takeaway: Clients benefit from exposure to companies that are adapting quickly to new productivity dynamics and preserving margins, not just chasing top-line growth.
3. The Market Rally Will Broaden Out
One of the most encouraging elements of BofA’s outlook is its expectation that the equity rally will expand beyond the handful of mega-cap technology leaders that have carried markets in recent years.
Strategists highlight the potential for gains to spread into areas like energy, industrial machinery, equipment, and financials. AI adoption remains a driver, but the more significant catalyst could be a broad-based capital expenditure boom fueled by policy incentives and infrastructure spending.
“Projects delayed since April bode well for a broader investment pickup,” Subramanian’s team noted. “Record municipal issuance in infrastructure and transport, alongside incentives to spend now versus later thanks to the OBBBA, all support a capex-driven expansion.”
Evidence of broadening leadership is already emerging. The Russell 2000 has surged 37% from its post-Liberation Day trough, recently touching record highs. This shift toward small- and mid-cap participation suggests a healthier, more sustainable rally.
For RIAs, this dynamic opens the door to sector rotation strategies, active management opportunities, and re-engagement with asset classes that have lagged. Clients who were underweight small-caps, industrials, or financials may benefit from incremental exposure as the cycle matures.
Key takeaway: A broadened rally allows for more balanced portfolio construction, reducing reliance on concentrated mega-cap tech positions.
Implications for Wealth Advisors
The BofA outlook provides a constructive roadmap for advisors as they help clients navigate 2026. Several strategic considerations emerge from the bank’s analysis:
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Maintain equity exposure, but stay valuation-aware. With another mid-to-high single-digit return year possible, advisors should ensure clients remain appropriately allocated while monitoring for froth in crowded sectors.
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Lean into productivity and investment themes. Companies and sectors driving efficiency gains and capital deployment are likely to outperform. Advisors can identify funds and managers with strong research capabilities in industrials, energy transition, and digital infrastructure.
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Reassess small- and mid-cap allocations. The rally’s broadening suggests advisors should revisit client exposures outside mega-cap tech. Small- and mid-cap stocks offer diversification and could benefit disproportionately from policy-driven capex.
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Reinforce the importance of earnings growth. Strong corporate profits underpin market resilience. Advisors can use this as a talking point with clients who remain cautious after recent volatility.
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Position for potential volatility. While the trajectory is constructive, trade, policy, and geopolitical risks remain. Advisors may want to complement equity exposure with hedging strategies, structured products, or alternatives designed to buffer drawdowns.
Context for Clients
As 2026 begins, advisors can frame the market environment for clients by emphasizing the contrast between headline risks and underlying fundamentals. While tariff disputes, shifting monetary policy, and political uncertainty have generated significant noise, the drivers of long-term equity returns—productivity, investment, and earnings growth—are improving.
The narrative of an economy able to absorb shocks and continue expanding mirrors past periods when innovation and capex cycles fueled extended rallies. Subramanian’s comparison to the 1980s and 1990s highlights that this is not just a short-term rebound but potentially the early stage of a longer structural expansion.
For RIAs, the challenge lies in translating these macro signals into client-appropriate strategies: maintaining discipline in asset allocation, communicating clearly about risks and opportunities, and ensuring portfolios are positioned for both growth and resilience.
Final Thought
Bank of America’s 2026 outlook is neither euphoric nor defensive—it is pragmatic. The bank sees another year of steady gains, driven by earnings growth and a broadening rally that reduces dependence on a narrow group of leaders. For wealth advisors, this environment presents both opportunities and responsibilities: to keep clients invested, to diversify exposures, and to anticipate shifts in leadership.
The coming year will likely test client patience at times, but the foundation for continued growth appears firm. For those tasked with stewarding wealth, the lesson is clear: 2026 offers a chance to capitalize on expansionary trends while building portfolios prepared to withstand the inevitable volatility that comes with investing.
