S&P 500 Bull Market Extends into 2026 Amid Cooling Valuations
The S&P 500 has notched its third consecutive annual gain, with historical trends favoring continued growth. Since 1958, the index has closed higher in 75% of calendar years, including 19 instances of 20%+ rallies. Earnings projections suggest double-digit gains for 2026, supported by the Federal Reserve's 175 basis points of rate cuts over the past 15 months.
Recent sideways trading has tempered valuations, particularly in AI-related stocks. The Nasdaq 100's forward P/E of 26 now sits below its two-year average, narrowing its premium over the S&P 500 to a six-year low. Despite this cooling, Optimism persists—57.5% of analyst ratings remain Buy recommendations, matching February's peak.