Will 2025 be the Final Year for the S&P 500’s Double-Digit Growth Spurt?

Optimism for US equities remains high following a bull run that was sparked by the arrival of generative AI large language model (LLM) ChatGPT in late 2022, with more traders and analysts expressing enthusiasm for the year ahead.

Goldman Sachs trader Kostin Sticks recently bet $21 million on a 30% S&P 500 rally by December 2026, while Evercore analyst Julian Emanuel also claimed that a 30% rally is possible for the index, suggesting that there’s a one-in-four chance that the 9,000 mark is surpassed for the first time next year.

While Emanuel’s more grounded best-case scenario points to 13% growth to 7,750 in 2026, it remains clear that industry experts expect that the trend of double-digit market rallies is set to remain the norm, but is recency bias clouding the overall outlook for the market?

The Threat of Corrections

Following growth of 26% and 25% in 2023 and 2024, respectively, the S&P 500 has entered November more than 16% higher than at the beginning of 2025, fueling expectations of another double-digit year for growth.

Three consecutive years of growth is a rare occurrence on Wall Street and has only happened 11 times in the past century, dating back to the S&P 500’s previous iteration as the S&P 90.

The Buffett indicator, which is a measure of the ratio between the total US stock market capitalization and GDP, is increasing to exceptionally high levels, suggesting that current momentum throughout equity markets is reaching unsustainable values.

However, any short-term frailties in the S&P 500 are likely to be countered by an end-of-year Santa Claus rally as consumer spending increases for the holiday season. While this may increase the likelihood of a strong end to 2025, it makes the outlook for the year ahead less clear.

More conservative outlooks for 2026, such as a recent forecast by UBS that anticipates the S&P 500 index could reach 7,300 by the end of the first half of next year at a growth rate of 6%, suggest that Wall Street’s ongoing AI rally is cooling but still driving market values higher.

The long-term outlook for the S&P 500 will rely on many geopolitical factors, and the outcome of trade negotiations between the United States and China will weigh heavily on markets into the new year.

Waning AI Momentum

The artificial intelligence boom has formed the foundation for a major ongoing tech rally on Wall Street that’s seen market leaders like Nvidia become the world’s first $4 trillion company this year.

This market rally has been astonishing, but an eventual market slowdown would have major ramifications for the S&P 500’s growth prospects in 2026 and beyond.

Worryingly, a recent IBM study suggests that CEOs have reported that only 25% of AI initiatives have delivered the expected ROI over the last few years, while just 16% have scaled throughout enterprises.

To add to these concerns, MIT’s State of AI in Business 2025 report found that 95% of generative AI pilot projects haven’t produced any discernible financial savings or significant profits, despite an estimated $30 billion to $40 billion being spent on corporate AI solutions.

These early signs of strain in the implementation phase of AI solutions could point to a disconnect between the ‘tell me’ and ‘show me’ aspects of artificial intelligence, and jitters over a disconnect between the promise of major tech projects and their ability to deliver could lead to Wall Street sell-offs.

Preparing for Uncertainty

The S&P 500 is dominated by sizeable tech companies that could be adversely impacted by a loss of confidence in AI throughout 2026, but this doesn’t mean that investors can’t build profitable portfolios for the year ahead.

One key consideration should focus on diversification. While AI firms have long been Wall Street’s strongest movers since the launch of ChatGPT in late 2022, investors must protect themselves against any signs of weakness in the ongoing artificial intelligence rally.

With this in mind, it’s worth including defensive stocks and dividend-paying companies that have consistently shown that they can perform even in wider market downturns.

Will the S&P 500 Struggle in 2026?

Despite tangible fears about the long-term sustainability of the artificial intelligence boom on Wall Street, optimism remains high that the S&P 500 will continue to grow in the year ahead.

While this is good news for investors, early warning signs show that adopting a more diversified approach to protect portfolios against a possible AI slowdown could be a rewarding strategy in the new year.

Whether the S&P 500 can continue to soar to double-digit growth in 2026 is subject to much speculation, but with the right preparation, investors can still enjoy a strong year even if tech leaders experience a more subdued 2026.