Every December, Wall Street unveils a fresh batch of S&P 500 forecasts—beautifully formatted, precisely modeled, and delivered with the confidence of someone reading tomorrow’s weather from a script.
The only issue?
They’re almost always wrong. Not because analysts lack intelligence, but because markets are complex and adaptive systems that don’t bend to linear predictions. Yet investors crave precision, and Wall Street is always happy to provide it.
Let’s walk through the past four years of forecasts—2022 through 2025—and then look ahead to the newly released predictions for 2026.
2022: Analysts Overestimated Reality
Wall Street predicted modest returns of 3.85%. The market delivered far worse than expected, declining by 19%.
2023: Analysts Underestimated Reality
Analysts predicted another year of modest gains. The S&P 500 rallied at over 24%. Two years, two big misses—each in opposite directions.
2024: Precisely Wrong Again
The consensus called for a muted, quiet year.
Instead, the S&P 500 climbed +23%.
Three straight years of confident forecasts—three straight years of meaningful misses.
2025: “Modest Upside” … Until the Market Blew Through It
Before 2025 began, most firms clustered their forecasts around 6,500–6,700:
- Fundstrat / UBS / Ned Davis: 6,600
- BMO: 6,700
- Bank of America: 6,666
- JPMorgan & Morgan Stanley: 6,500
- Deutsche Bank: 7,000
The “Street average” settled at around 6,614.
As of the most recent closure, the S&P 500 sits at 6,766, already above nearly all forecasts. If the year ended today, average analyst forecasts might be more accurate. We all know there’s more to go in 2025.
2026: The Parlor Trick Continues
This Financial Times chart perfectly captures Wall Street’s 2026 outlook: a spray of upward-sloping dotted lines, each one representing a major bank’s “best guess” for next year’s S&P 500 level.
The visual message is clear: Up, up, and up.
But after four straight years of forecasting misses, these tidy lines look less like insight and more like habit.
2026 S&P 500 Forecasts — Implied Returns
Using an S&P 500 level of ~6,765:
- Deutsche Bank: ~7,800 → +15.3%
- Morgan Stanley: ~7,400 → +9.4%
- UBS: ~7,300 → +7.9%
- JPMorgan: ~7,300 → +7.9%
- HSBC: ~7,300 → +7.9%
- BNP Paribas: ~7,250 → +7.2%
- Barclays: ~7,200 → +6.4%
- Société Générale: ~7,150 → +5.7%
- Bank of America: ~7,000 → +3.5%
Street Average: ~7,300 → +7.9%
The precision of these forecasts is seductive. Their accuracy is likely to be nonexistent.
What Investors Should Actually Do
This is where the real work begins. Forecasts are entertainment. Behavior is strategy. Wall Street shows you what doesn’t matter, here is what does:
Market Declines Are Normal — and Frequent
- –5% declines: 3× per year
- –10% declines: 1× per year
- –15% declines: every 2 years
- –20% declines: every 3.5 years
Volatility is the cost of admission—not a signal to abandon long-term strategy.
The Average Investor Dramatically Underperform
Why?
Because investors trade based on emotion, forecasts, headlines, and reaction—not discipline. Behavior, not fees or asset allocation, is the biggest drag on investor returns.
Time is the the Only Real “Crystal Ball”
In one year, stock returns have ranged from +52% to –37%. Over 20 years, the range tightens dramatically to +18% to +6%. Time is the great equalizer.
The past four years—2022 through 2025—have shown that Wall Street’s precise, authoritative forecasts bear little relationship to reality. Yet the predictions continue, and the 2026 dotted lines tell the same story: plenty of confidence and very little actual foresight.
Investing success comes from:
- Staying invested
- Diversifying intelligently
- Accepting volatility
- Avoiding emotional decisions
- Letting time shape risk
Precision is comforting and Wall Street accuracy is rare. Discipline is everything.
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Tim Phillips, CEO, Phillips & Company
Sources:
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The material contained within (including any attachments or links) is for educational purposes only and is not intended to be relied upon as a forecast, research, or investment advice, nor should it be considered as a recommendation, offer, or solicitation for the purchase or sale of any security, or to adopt a specific investment strategy. The information contained herein is obtained from sources believed to be reliable, but its accuracy or completeness is not guaranteed. All opinions expressed are subject to change without notice. Investment decisions should be made based on an investor’s objective.