'An excellent backdrop for earnings': Wall Street expects profit growth to power markets in 2026

Core Insights - Wall Street strategists emphasize that earnings growth will drive the stock market higher this year, supported by easing inflation and job growth [1] Earnings Growth Expectations - Analysts predict the S&P 500 will achieve year-over-year profit growth of approximately 8.3% for Q4, with some estimates from FactSet suggesting growth could exceed 14%, marking the fifth consecutive quarter of double-digit earnings expansion [2] - BNY Wealth strategists also forecast earnings growth around 14% this year, influenced by tax incentives and benefits from corporate tax rate reductions [3] Sector Contributions - Earnings contributions are expected to come from various sectors beyond technology, indicating a less concentrated market [4] - Recent outperformance in sectors such as Materials, Industrials, and Energy is noted as a factor driving the cyclical tilt in the market [5] Market Trends and Federal Reserve Outlook - The AI sector is identified as a significant trend influencing economic growth [7] - Wall Street anticipates potential easing from the Federal Reserve, with expectations of two rate cuts this year, which could positively impact medium-term bonds [8][9]