Uncomfortably Bullish

Wall Street is heading into 2026 in a mood that can best be described as “uncomfortably bullish.” The largest research houses on the Street—Merrill, Goldman Sachs, Morgan Stanley, J.P. Morgan, Wells Fargo, Charles Schwab, Citigroup, UBS, and Edward Jones—are, in different ways, pointing in the same general direction: they expect stocks to finish 2026 higher than where they began. At the same time, they are unusually vocal about the risks, from high valuations to narrow market leadership and policy uncertainty.

This combination—expecting another up year, but not feeling particularly relaxed about it—is what defines an “uncomfortably bullish” environment. As an investor, you do not need to agree with every Wall Street forecast, but it is helpful to understand how the big firms are framing the year ahead, why they are still positive, and what they are worried about. That context can help you decide how to stay invested thoughtfully, rather than reacting to every headline.

The simple stance labels

Here is a quick, plain-English summary of how the major firms are characterizing their market stance going into 2026, based on their published outlooks and the tone of their commentary.

Merrill / BofA (Merrill Lynch) – Bullish
Goldman Sachs – Bullish
Morgan Stanley – Bullish
J.P. Morgan – Cautious bull / Moderately bullish
Wells Fargo – Constructive / Moderately bullish
Charles Schwab – Cautiously constructive Neutral-to-mild bull
Citigroup – Constructive / Neutral-plus
UBS – Constructive / Moderately bullish
Edward Jones – Neutral-to-constructive

Taken together, that is a very one-sided scoreboard. None of these firms is outright bearish on stocks for 2026, and several use language that clearly places them in the bullish camp, while others soften that stance by emphasizing caution, valuation discipline, and the importance of diversification.

Why so many are still positive

If Wall Street is nervous, why is almost everyone still expecting gains? The answer lies in the underlying story they are telling about the economy and corporate profits.

Across outlooks, the core narrative is that 2026 can deliver another year of positive equity returns, but for different reasons than in the recent past. Early stages of this bull market were driven heavily by falling interest rate expectations, relief that inflation was cooling, and enthusiasm around artificial intelligence and related technologies. Those forces are still in play, but the focus is shifting toward earnings growth.

Merrill and BofA Global Research, for example, describe a scenario in which the S&P 500 can reach roughly 7,100 by the end of 2026, with mid-single-digit price gains on top of a strong year for corporate profits. Goldman Sachs is similarly looking for around a 12% total return, anchored by about 12% earnings growth and a still-solid economic backdrop. Morgan Stanley and J.P. Morgan both talk about double-digit gains in earnings over the next year or two, supported by AI-related capital spending, productivity gains, and a benign policy environment. These figures represent third-party expectations, not guarantees, and actual results may differ materially.

In plain terms, the Street expects companies to grow into their valuations. The assumption is that profits will rise fast enough, for long enough, to justify today’s high price-to-earnings ratios. If that happens, then even a market that looks expensive now may not look quite as stretched a year or two from now.

The macro backdrop in many of these reports is also constructive. Forecasts typically feature:

• Economic growth that is modestly above trend, not a boom but not a recession either.
• Inflation that continues to moderate toward central-bank targets, giving the Federal Reserve room to cut rates gradually.
• Fiscal and regulatory policy that remains relatively supportive of business investment, particularly in technology, infrastructure, and energy transition themes

That mix—steady growth, gently falling rates, and strong profit trends—is historically a friendly environment for equities. It explains why so few of the major houses are willing to turn bearish, even as they acknowledge how much good news is already priced in.

Why the Street is uncomfortable

If the story is so favorable, where does the discomfort come from? The unease stems from three broad concerns that show up again and again in the research: valuation, concentration, and uncertainty.

Valuation is the most obvious issue. Many 2026 outlooks explicitly note that U.S. equity valuations are elevated compared with long-term averages, especially in the largest technology and AI-related stocks that have led the market higher. When prices bake in high expectations, the margin for error shrinks. Any disappointment—whether in earnings, economic data, or policy—can trigger outsized reactions.

Concentration is the second, related concern. A meaningful share of index performance has come from a relatively small group of mega-cap companies. Several firms, particularly Schwab and Wells Fargo, highlight the risk of investors crowding into the same leaders, leaving portfolios vulnerable if leadership rotates or a popular theme falls out of favor.

Uncertainty is the third key theme. Even if the base case calls for a soft landing and continued earnings growth, strategists are quick to list what could go wrong: policy missteps, geopolitical shocks, unpredictable election cycles, or a re-acceleration of inflation that forces central banks to tighten instead of easing.

Put together, those factors leave Wall Street in an unusual position. Nearly everyone expects stocks to go up, but nearly everyone also feels they have to stress-test that optimism against a longer list of “what ifs” than usual. The result is a positive outlook wrapped in cautionary language—which is exactly what “uncomfortably bullish” sounds like.

How each stance translates in practice

The simple label each firm gets—bullish, cautious bull, constructive, neutral-to-constructive—is more than a slogan. It shapes how they recommend investors allocate capital.

Merrill, Goldman Sachs, and Morgan Stanley, all squarely in the bullish camp, generally favor maintaining or even modestly increasing equity exposure, with a clear emphasis on U.S. stocks. Their research tends to highlight opportunities in areas tied to AI, productivity, and capital spending, while also pointing to more cyclically sensitive sectors like industrials and financials as potential beneficiaries of continued growth.

J.P. Morgan’s “cautious bull” stance leans into the same broad themes—AI, capex, and solid earnings—but pairs them with a bigger focus on risk management. Their commentary often stresses that while the bull market can continue, the balance between offense and defense matters more as the cycle matures. That can mean greater selectivity within equities and a fuller use of fixed income and alternatives to help manage volatility.

Wells Fargo and UBS, described here as constructive or moderately bullish, generally encourage clients to stay invested in risk assets while paying close attention to valuations and concentration. They frequently call out the danger of treating AI as the only game in town, instead promoting a broader opportunity set that includes infrastructure, energy transition, and more traditional sectors poised to benefit from steady growth and falling rates.

Charles Schwab and Edward Jones, both in the neutral-to-constructive range, tilt the conversation away from trying to time the market and toward sticking with a long-term plan. Schwab’s research emphasizes diversification and valuation discipline and even highlights relatively attractive long-term return expectations in fixed income and non-U.S. equities compared with U.S. large-cap growth. Edward Jones, in its client-facing material, tends to frame 2026 more as another chapter in a long investing journey rather than a year to make big directional bets.

Citigroup’s public guidance, while less specific about S&P 500 point targets, echoes a constructive view by building its plans on a backdrop of steady growth and a supportive rate environment. That is effectively a neutral-plus stance: not aggressively bullish, but clearly not preparing for a downturn either.

What this means for you as an investor

For both potential and existing clients, the message from this research is not “all clear, jump in with both feet.” It is also not “run for the exits.” Instead, the message is closer to this: staying invested still makes sense, but how you are invested matters more than ever.

In an uncomfortably bullish environment, being completely out of the market can be its own kind of risk. When nearly every major firm expects equities to finish the year higher, sitting entirely in cash increases the odds of falling behind your long-term goals if those forecasts prove even roughly correct. At the same time, concentrating too heavily in the narrow group of stocks that have led the market—especially at elevated valuations—can expose you to sharp drawdowns if leadership shifts.

This is why so many outlooks, even the more bullish ones, hammer the themes of diversification and quality. Diversification across sectors, geographies, and asset classes can help smooth the ride when markets inevitably stumble, while exposure to companies with stronger balance sheets and more reliable cash flows can provide a buffer in volatile periods.

For existing clients who have been invested through the recent bull market, 2026 may be an appropriate time to ask whether the portfolio still lines up with your original risk tolerance, or whether gains in certain areas have pushed you into a more aggressive posture than you intended. For potential clients who have been on the sidelines, this year’s research suggests that waiting for the “perfect” entry point may be less important than establishing a sensible, staged approach to getting invested, and then letting a disciplined plan guide future decisions.

Navigating “uncomfortably bullish” together

From a professional standpoint, the goal is not to guess which firm’s S&P 500 target will land closest to reality. Forecasts will differ, and even the consensus can be wrong in either direction. Instead, the goal is to use the research to frame the environment: a supportive economic and earnings backdrop, a market that has already moved a long way, and a set of risks that argue for prudence rather than panic.

In that environment, being uncomfortably bullish means accepting that optimism and caution have to coexist in the same portfolio. It means staying engaged with markets, but not blindly chasing what worked last year. It means taking the positive message from Wall Street—that there are still reasons to be constructive on equities in 2026—and translating it into a plan that fits your time horizon, your goals, and your ability to live with volatility.

If you are already a client, this is a natural moment to revisit your allocation and confirm that your strategy reflects both the opportunities and the risks highlighted in these 2026 outlooks. If you are a potential client, it may be an opportunity to start a conversation about how to put an “uncomfortably bullish” world to work for you, in a way that is confident but not complacent.

To learn more, schedule a meeting with one of our financial professionals today.