Banking giant issues most bearish 2026 stock market outlook

Core Viewpoint - Bank of America Securities has issued a cautious outlook for the S&P 500, projecting limited upside and an index target of 7,100 for 2026, which represents a gain of less than 5% from its recent close of 6,816 [1][4]. Group 1: Market Outlook - The bearish stance is attributed to expected valuation pressure across U.S. equities, with meaningful multiple compression anticipated due to concentration in large-cap technology and AI-linked stocks [4][5]. - Recent weakness in technology stocks is expected to persist as AI adoption disrupts the labor market, impacting consumption and earnings in consumer-facing sectors [5]. Group 2: Investment Strategy - Bank of America favors a defensive investment strategy for 2026, overweighting consumer staples while underweighting consumer discretionary stocks, which are more sensitive to household spending [6]. Group 3: Contrasting Views - This outlook contrasts with other major banks, such as JPMorgan, which projects the S&P 500 to reach 7,500 by the end of 2026, citing resilient economic growth and strong AI investment [7]. - Goldman Sachs has raised its target to 7,600, highlighting expanding corporate profits and AI-driven productivity gains [8]. - Morgan Stanley is notably bullish, projecting a target of 7,800, arguing that recent market pullbacks reflect valuation pressures rather than deteriorating fundamentals [9].