On January 8, Goldman Sachs strategists outlined five major predictions for the U.S. stock market in 2026 in a report to clients.

Prediction 1: The bull market will continue, but at a slower pace. Goldman Sachs strategists forecast that the S&P 500 could rise to around 7,600 points by year-end, implying an annual gain of approximately 12%. Steady economic growth, AI-driven productivity improvements, and strong earnings from large corporations will provide fundamental support for the continuation of the bull market.

Prediction 2:Cyclical investments are expected to outperform. Factors such as the resurgence of economic activity after government reopenings, the *Big and Beautiful Act*, looser financial conditions, and lower-than-expected economic impacts from tariffs will drive economic growth, all of which will support cyclical investments.

Prediction 3:AI investment will continue to intensify. Goldman Sachs predicts that capital expenditures this year could surge by about 36%, reaching $539 billion, and may increase by another 17% in 2027 to $629 billion.

Prediction 4: The AI market is entering a new phase. Goldman Sachs strategists refer to this new phase as the "Third Phase," which may include the following characteristics: a slowdown in the growth rate of capital expenditures, more companies adopting AI, and the emergence of a new batch of AI-benefiting enterprises.

Prediction 5:M&A activity will remain robust. M&A transaction value this year is expected to grow by about 15% compared to last year. Strong economic growth, accommodative financial conditions, and increased confidence among corporate leaders are all factors supporting active M&A.