Thanks to a 26% increase in technology companies (XLK), the S&P 500 (^GSPC) is expected to end the year with a gain of more than 17%. "I don't see any bubbles.
But I do think we're heading into a bubble," Mary Ann Bartels, chief financial strategist at Sanctuary Wealth, told Yahoo Finance last week.
Batels linked the present market to earlier bubbles, such as the dot-com bubble and the late 1920s. "Our tracking is somewhat similar.
We're actually following that pattern, which is kind of unsettling," she remarked. "I see a bubble forming, but it won't burst until maybe 29 or 30."
However, Sanctuary experts predict that technology will continue to drive the market higher till the end of the decade. By 2030, they estimate the S&P 500 to be between 10,000 and 13,000.
"We're calling 2026, you know, to be fearless, because there's still significant upside in this market, particularly for technology," she stated.
Semiconductor stocks contribute to the rise. With Nvidia (NVDA) "basically rewriting the path for semiconductor chips," they transform from commodity plays into growth equities.
The market capitalization of the AI chip giant has increased by more than 40% so far this year, reaching $4.6 trillion, making it the most valuable publicly traded firm.
Following the announcement of a $20 billion licensing agreement with specialized chipmaker Groq (GROQ.PVT), Nvidia shares increased on Friday. As the chip market heated up and Alphabet's Google (GOOG) made headlines with its bespoke client processors known as TPUs, the deal was disclosed. Alphabet's stock has increased by almost 65% so far this year.
Additionally, UBS strategists anticipate that strong profit growth and the AI surge would support market gains in 2026. The strategists wrote last week, "We observe that forward price-to-earnings multiples are only slightly higher than at the beginning of the year, reinforcing the fact that earnings growth and not valuation bubbles have driven market gains."
According to UBS, S&P 500 earnings per share will increase by roughly 10% annually, bringing the index to 7,700 by the end of the following year.
Ed Yardeni, a seasoned strategist, predicts that the index will reach 7,700 next year, with a 60% chance of his "Roaring 2020s" scenario.
He mentioned the AI boom and tax advantages from this year's "One Big Beautiful Bill" among other factors. Goldman Sachs analysts contended in October that the stock market isn't in a bubble since tech equities have increased mostly as a result of real growth rather than speculative wagers.
The company pointed out that the AI industry is still dominated by a small number of major players and that top-performing businesses have solid balance sheets, whereas most bubbles happen when a large number of new players enter a hot market.
The top seven S&P 500 stocks have driven the majority of this year's profit growth, but Goldman Sachs analysts also expect a broadening of participation.
Earlier this month, Goldman's Ben Snider wrote, "We expect macro tailwinds from accelerating economic growth and a fading tariff drag on margins will support an acceleration in the earnings growth rate for the remaining 493 stocks."
According to Joseph Shaposhnik, founder of Rainwater Equity, AI productivity is anticipated to increase profits for businesses outside of the "Magnificent 7" stocks.
He told Yahoo Finance, "I think some of them will take a break some of them will perform well." "But really, the opportunity for outsized returns next year are going to be outside those seven businesses," he stated.
