4 Factors That Could Boost S&P 500 Even Further in 2026

Core Viewpoint - The S&P 500 is experiencing a recovery after a challenging start to 2025, with expectations for continued growth driven by the AI boom and moderate economic strength [1][2][3]. Economic Indicators - U.S. GDP grew by 3.3% in Q2 2025, rebounding from a 0.5% decline in Q1, with consumer spending and private investment showing stronger-than-expected performance [3]. - The anticipated Federal Reserve interest rate cuts could further support market growth, with a 91.6% probability of a 25-basis point cut in September [7]. Corporate Earnings - The Q2 earnings season shows positive trends, with S&P 500 earnings expected to grow by 8.9% in 2025, 12.1% in 2026, and 13.8% in 2027 [4]. - The "Magnificent 7" tech stocks (NVIDIA, Microsoft, Apple, Alphabet, Meta, Amazon, Tesla) are projected to drive significant earnings growth, with a 25.1% increase in Q2 earnings compared to the previous year [5][6]. AI Impact - The "Magnificent 7" stocks account for approximately 35% of the S&P 500 market capitalization and are expected to contribute 24.9% of total S&P 500 earnings in 2025 [5][6]. - Total earnings for the "Magnificent 7" are expected to increase by 16.9% in 2025, supported by a 10.3% rise in revenues [6]. Investment Opportunities - Investors may consider S&P 500 ETFs such as Vanguard S&P 500 ETF (VOO), iShares Core S&P 500 ETF (IVV), and SPDR S&P 500 ETF Trust (SPY) for exposure to the index [8]. - For growth exposure, SPDR Portfolio S&P 500 Growth ETF (SPYG) is recommended, while SPDR Portfolio S&P 500 Value ETF (SPYV) caters to value investors [9]. - Leveraged S&P 500 ETFs like Direxion Daily S&P 500 Bull 3X Shares (SPXL) are available for those willing to take on higher risk [10].