Even though concerns around sky-high valuations in the artificial intelligence trade put the market under significant pressure in the last week , the tech-fueled bull market should still reach new heights next year, according to UBS. "Base case, we see the S & P 500 rising to 7,500 in '26 driven by ~14% earnings growth, nearly half of that from Tech," Arend Kapteyn, the firm's global head of economics and strategy research, wrote in a note. That forecast, which implies nearly 12% upside from Friday's closing price, comes as the S & P 500 has already surged more than 15% this year. .SPX YTD mountain S & P 500, year-to-date To be sure, the economist added that the market could see a "small negative" impact from continuing concerns around valuations. Key AI stocks were propelling the market higher in morning trading on Monday, making up ground from the past week's losses, as investors grew more hopeful that the record-setting U.S. government shutdown would soon see an end . Nvidia and Palantir Technologies soared more than 4% and 7%, respectively. Broadcom and Oracle also saw a boost. With earnings expectations as well as valuations "among the highest in four decades," Kapteyn forecasts an "imminent broadening and strengthening of growth" from the second quarter on, preceded by a "speed bump" as President Donald Trump's tariffs temporarily dampen the U.S. economic picture. "The market should consolidate and high-quality stocks should outperform," he continued. "From late Q1, we should see a broadening of the rally into lower-quality cyclicals." While Kapteyn believes the global economy will grow in 2026, it faces a "soft patch" over the course of the next four to five months as tariffs affect prices in the U.S. and exports globally.
