Wells Fargo sees S&P 500 clocking double-digit gain in 2026 as AI boosts profits, tax refunds lift spending

Core Viewpoint - Wells Fargo projects a bullish outlook for the S&P 500, expecting it to reach between 7,400 and 7,600 by 2026, indicating a potential gain of up to 11% driven by consumer spending, AI investment, and deregulation [1][2]. Group 1: Market Performance and Projections - The S&P 500 is currently up 16% this year and is on track for its third consecutive year of double-digit gains, having previously logged over 20% gains in both 2023 and 2024 [3]. - Wells Fargo's forecast for the S&P 500 aligns with other positive outlooks, with predictions ranging from 7,100 to 8,000 [2]. Group 2: Key Drivers of Growth - Three main factors are expected to support stock prices in the upcoming year: lower interest rates, benefits from the AI investment cycle, and increased consumer spending due to larger tax refunds from the One Big Beautiful Bill Act (OBBBA) [3][4]. - The OBBBA is anticipated to provide consumers with one of the largest tax refunds in decades, enhancing their spending power [4]. Group 3: Historical Context and Implications - Historical data shows that when the Federal Reserve cuts interest rates while the S&P 500 is near record highs, the index has always been higher 12 months later [5].