Will the US stock market rally continue? Wall Street is betting on 2026, with both divergence and risks amplifying.

Wall Street institutions are optimistic that the rise in U.S. stocks will continue until 2026, CFRA strategists are bullish on the S and P 500 to 7400 points, and Bank of America expects the rise to slow while also warning of two extreme scenarios

As U.S. stocks continue to hit new highs in 2024, Wall Street has shown a rare mix of consensus optimism and structural divergence on the trend for the next two years. CFRA believes the upward trend will continue until 2026 and expects the S and P 500 to reach 7400 points, while Bank of America is more cautious, believing the rise can continue but may slow, and at the same time presenting two possible extreme paths: one is that economic overheating leads to a rapid surge, and the other is that tightening pressure triggers a sharp reversal.

For long term investors, such differences in market sentiment are not uncommon, and they often indicate that the cycle is entering an important turning point.
Our team conducted a systematic analysis of the current market from four perspectives: macro, quantitative, asset allocation, and long term capital management.

One, global macro environment: growth resilience remains, but conditions are undergoing structural changes

(From the macro perspective of Founder Ray Dalio)

Ray Dalio emphasizes that the core variables of the current cycle still revolve around three points:

1: global liquidity is still loose, and although the pace has slowed, there has been no systemic tightening
2: the U.S. economy maintains structural resilience, especially with substantial improvement in technology capital expenditure and productivity
3: geopolitical risks and fragmentation have increased the volatility of asset prices rather than their direction

In his framework, if the long term debt cycle is still in a high but not reversed stage, then the stock market still has room to rise, especially when productivity drivers (AI, automation, energy structure adjustment) become the main force of returns.

Therefore, from a macro structure perspective, it is not unreasonable for the rise to extend to 2026, but Dalio also emphasizes a core principle:

“The market can continue to rise, but that does not mean that risk is decreasing.”

Two, quantitative perspective: market momentum is strong, but the volatility structure is forming

(From Partner Steve Cohen)

Steve Cohen’s analysis shows:

• liquidity remains strong due to the balance sheet expansion of large technology companies
• CTA, quantitative long positions and ETF passive funds continue to push valuations higher
• implied volatility in the options market has been suppressed for a long time
• there has been no large scale withdrawal or reverse hedging behavior

The conclusions of the quantitative models are:

✔ upward momentum remains solid
✔ trend trading strategies still maintain net long positions
✔ structural pullbacks may occur at any time, but are not enough to change the main direction

Steve’s view is closer to CFRA:

“Unless there is a significant liquidity contraction, the current market trend is still upward.”

Three, asset allocation perspective: Bank of America’s “extreme scenarios” explain why we remain neutral to moderately bullish

(From CIO Katy Tian)

Katy Tian’s judgment is closer to Bank of America:

She believes:

• base case: the rise continues, but the pace slows
• extreme scenario 1: AI productivity leads to valuation repricing, and U.S. stocks enter a “second acceleration”
• extreme scenario 2: inflation rises again plus interest rates do not fall as expected, causing a sharp market correction

In terms of asset allocation, Katy’s recommendations are:

1: maintain core U.S. equity positions but control concentration
2: do not reduce positions in technology leaders, but increase allocation to value and defensive sectors
3: allocate a higher proportion to cash flow generating assets (energy, healthcare, insurance, REITs)
4: avoid leverage and avoid one sided bets on AI themes

Her summary is very direct:

“It is not a question of whether to be bullish, but of managing risk during the rise rather than waiting for a pullback to manage risk.”

Four, long term family capital perspective: it is not about predicting the market, but about predicting risk

(From Family Governance and Long Term Strategy)

Members responsible for long term capital structure (professionals in various fields) emphasize:

• the goal of family capital is not to “earn the most” but to “cross cycles and grow continuously”
• predicting the market can never be the core of decision making, predicting risk is
• whether the U.S. stock rally lasts until 2026 or ends early does not affect the long term strategy
• asset allocation must focus on “anti fragility” rather than “betting on direction”

They pay more attention to:

• maintaining stable liquidity
• adjusting allocation ratios with the cycle
• maintaining diversification across assets and regions
• enhancing the inflation resistance of family assets

“A rising market does not equal safety. Risks are easier to ignore during rising phases, and risks often appear without signals before the rise ends.”

Five, our final judgment on the current market: structural upward trend may continue, but the pace and volatility will change

After integrating the views of all members, our office’s judgment is as follows:

✔ the upward trend in U.S. stocks may continue until 2026 (close to CFRA’s view)

• technology driven productivity truly improving earnings
• corporate capital expenditure rising
• liquidity still relatively loose
• consumption and employment remain resilient

✔ but the slope of the rise will slow significantly (consistent with Bank of America’s view)

• valuations are already high
• macro factors are more complex
• inflation risk has not fully disappeared
• geopolitical tensions may bring shocks

✔ extreme scenarios deserve more attention

We believe both extreme paths proposed by Bank of America may occur:

1: a technology boom leads to a second valuation breakout
2: rising interest rates and inflation cause a deep correction

In terms of asset allocation, the most reasonable strategy remains:

neutral to moderately bullish, avoid aggressive bets, progress steadily, diversify structurally.

Conclusion: the rise is worth enjoying, but risk cannot be ignored

The market has its own rhythm, but family capital has its own cycle.

We do not chase short term directions, nor do we ignore long term value.
Whether the S and P reaches 7400 points or not, what we always focus on is:

✔ whether we can cross cycles
✔ whether we control risk
✔ whether we maintain long term compounding
✔ whether our asset structure becomes more stable, healthier, and more resilient

And this is also the original intention of establishing our office.