Fidelity fund manager resets tech stocks forecast for 2026

Market Performance - The S&P 500 is projected to finish the year up 16%, marking a third consecutive year of double-digit returns that exceed historical averages [1] - The gains follow significant returns of 23% in 2024 and 26% in 2023, primarily driven by increased interest in artificial intelligence and a more accommodating Federal Reserve [1] AI and Technology Sector - The rise of AI, initiated by the successful launch of OpenAI's ChatGPT three years ago, is being compared to the early days of the Internet [2] - Major technology companies have invested hundreds of billions of dollars in AI-optimized servers, with spending expected to continue through 2026 [2] - Fidelity's Select Technology Portfolio has achieved an average annual return of 34% over the past three years, outperforming the S&P 500 by nearly 15% [3] Federal Reserve Policy - The Federal Reserve's primary objectives are to maintain low unemployment and inflation rates, which often conflict with each other [5] - To combat inflation, the Fed raised interest rates by 5% in 2022 and 2023, which slowed the economy and negatively impacted profits, leading to a bear market [6] - The S&P 500 and tech-heavy Nasdaq experienced declines of approximately 27% and 36%, respectively, from the end of 2021 to their lows in October [6] Leading Technology Stocks - The recovery in the market has been largely driven by major technology stocks, including the "magnificent seven": Apple, Microsoft, Alphabet, Amazon, Tesla, Meta Platforms, and Nvidia [7]