A cooling bull market and $540 billion in AI capex: Here are Goldman Sachs' 5 biggest 2026 market predictions

• Goldman Sachs unveiled its top predictions for markets in 2026.
• The bank expects the bull market in stocks to continue, but at a more modest pace than in recent years.
• A new chapter for the AI trade, robust capex, and an M&A boom are also on its radar.

After three straight years of stellar return, investors are searching for clues about what comes next.

According to Goldman Sachs, the answer is more gains, albeit at a more modest pace.

In a note to clients detailing the bank's US equity outlook on Tuesday, strategists unveiled Goldman's top market calls for this year. Another double-digit gain for the S&P 500, billions of fresh money being poured into AI, and a dealmaking spree are some of the things on its radar.

Optimism has been high on Wall Street for a while, with most forecasters still feeling bullish about the outlook for stocks even after a breakneck pace of gains since 2023. The benchmark index climbed 16% in 2025, outpacing its historical average return of 10% a year.

Here are Goldman's top five predictions for what comes next:

1. The bull market will continue at a slower pace

The bull market in stocks will chug on in 2026, but the blistering rally will cool down slightly.

The S&P 500 is on track to rise to around 7,600 by the end of the year, strategists wrote, implying a 12% gain for the benchmark index. That puts Goldman's outlook solidly in the middle of the pack among Wall Street forecasters, with other banks calling for a rise in the range of 3% to 16% in the next year.

That gain will largely be driven by strong earnings growth in the S&P 500, a team of strategists at Goldman suggested. In the note, they pointed to factors like strong economic growth, increased productivity from AI, and strong profits among large companies, which will provide the "fundamental base" for the bull market to continue.

2. Cyclical investments will outperform early in the year

The climate will favor cyclical invesments in early 2026, thanks to the US economy picking up steam.

Strategists pointed to growth catalysts like economic activity revving up after the government reopened, stimulus from President Donald Trump's Big Beautiful Bill, looser financial conditions, and a less-than-expected economic impact from tariffs. All those should also support cyclical investments, which, by definition, outperform when the economy expands.

"Corporates should be able to enjoy the revenue tailwinds from economic acceleration without facing the trade-offs from increased wage pressures or Fed tightening that often characterize late-cycle environments," the bank wrote.

Cyclicals already started pulling to the front of the market in the latter half of 2025, but investors likely haven't priced in the sector's full growth acceleration, strategists added, highlighting areas like middle-income consumer stocks and nonresidential construction stocks in particular.

3. AI spending will accelerate

AI capital expenditures among the so-called hyperscalers will keep growing at a healthy pace. Capex is on track to surge around 36% to $539 billion in the next year, according to Goldman's projections.

In 2027, that could be followed by a 17% increase to $629 billion.

"As spending and debt grow, so do the necessary eventual profits to justify ongoing investments," the bank wrote on why spending could slow down.

4. The AI trade will enter a new chapter

2026 could mark the beginning of a new era for the market's AI stocks. That next chapter — which the strategists referred to as "Phase 3" —looks like it could be defined by a few things:

1. Slowing capex. Phase 2 of the AI trade was largely defined by firms spending heavily to build AI infrastructure, the bank suggested.
2. More companies adopting AI. "We believe companies will need to demonstrate earnings uplifts from AI-related productivity before investors will embrace them as likely long-term beneficiaries," strategists wrote.
3. A new group of AI winners emerging. "As AI adoption increases, so will the clarity surrounding which stocks belong as part of the 'Phase 3' group of revenue beneficiaries," they added.

5. M&A activity will stay strong

Completed M&A transactions are on track to rise 15% over the year. The bank pointed to factors like strong economic growth, looser financial conditions, and increased confidence among business leaders, which should all support dealmaking.

A rebound for M&A activity already looks to have been underway in 2025. Large M&A transactions among strategic and sponsor acquirors in the US surpassed $1.9 trillion last year, a 75% rise when compared to the prior year, the bank said.

"Alongside a continued rebound in IPO activity, we expect 2026 will be another strong year for M&A," strategists wrote.