Analysts See an Early Santa Rally on Wall Street and Predict Strong Market Gains Heading Into 2026

The traditional Santa Claus rally usually arrives in the final stretch of December, but the market seems to be getting into a festive mood early this year a trend that could pave the way for another strong run in 2026.

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During the shortened Thanksgiving trading week, all three major US benchmarks delivered impressive gains. The Dow Jones Industrial Average climbed more than 3%, the S&P 500 advanced almost 4%, and the tech-heavy Nasdaq outperformed with gains north of 4%.

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This rebound comes after a sharp pullback earlier in the month, triggered by concerns that the artificial-intelligence trade had become overheated and signs that the Federal Reserve might not deliver the level of rate cuts investors had penciled in.

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“Santa’s back,” longtime strategist Ed Yardeni wrote over the weekend, signaling renewed optimism across Wall Street.

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A steep wave of bitcoin selling which Yardeni and others believe contributed to the recent bout of market weakness has now largely faded, allowing equities to stabilize and regain momentum heading into year-end.

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Yardeni reiterated his expectation that the S&P 500 could reach 7,000 before 2025 draws to a close and even suggested that the index has a shot at hitting that level in the coming week. If that scenario plays out, the broad market gauge would end the year with a roughly 19% gain, extending back-to-back annual rallies exceeding 20%.

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And he doesn’t see the market losing steam after that. Earlier in the week, Yardeni reaffirmed his projection that the S&P 500 could rise to 7,700 in 2026 implying another 10% move from his year-end 2025 target.

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“We believe 2026 will simply continue the momentum of the Roaring 2020s, which remains our central outlook,” he wrote. “This Roaring 2020s thesis has played out well over the six years since we first introduced it in 2020.”

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Deutsche Bank is projecting an even more aggressive upswing. Its strategists forecast the S&P 500 will end next year at 8,000, representing a gain of about 17% from Friday’s closing level.

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“We expect equities to keep benefiting from strong cross-asset inflows,” the bank’s analysts said. “With earnings still trending higher and companies signaling that they plan to maintain their current capital-allocation strategies, we anticipate robust levels of share buybacks to continue.”

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JPMorgan, on the other hand, is slightly more restrained in its outlook. The bank expects the S&P 500 to finish 2026 at 7,500, though it acknowledged the possibility of a move toward 8,000 if the Federal Reserve persists with interest-rate cuts.

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The firm pointed to several forces supporting this outlook: earnings growth that remains above trend, massive AI-related investment spending, higher shareholder returns, and fiscal stimulus from President Donald Trump’s One Big Beautiful Bill Act, which delivers another round of tax cuts.

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If inflation declines faster than current estimates, JPMorgan believes the Fed could deliver additional rate cuts beyond the two extra reductions already factored into its baseline forecast. That would provide even more fuel for equities.

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“Earnings tailwinds from deregulation and the continuing broad adoption of AI-driven productivity enhancements are still not fully appreciated,” the bank added, underscoring its view that corporate profitability has room to surprise on the upside.

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As Wall Street looks toward the final month of the year, the early arrival of holiday optimism paired with improving macro signals and strong institutional inflows could set the stage for another powerful run in stocks. And if the bullish forecasts from Yardeni, Deutsche Bank, and JPMorgan pan out, investors may find that the Santa Claus rally doesn’t just end the year on a high note it could also mark the start of another milestone stretch for the market.

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