U.S. stocks have begun 2026 echoing the previous year’s trends, particularly within the booming artificial intelligence (AI) sector. Early trading displayed notable movements: while tech-heavy Nasdaq saw a decline of about 0.4%, the S&P 500 was down approximately 0.2%, and the Dow Jones Industrial Average experienced a slight rise of 0.1%. The AI craze that significantly propelled stock gains in 2025 is anticipated to continue influencing market dynamics, although skepticism persists.
Analysts, including Jim Reid from Deutsche Bank, highlighted that financial assets displayed robust performance in 2025, bolstered by sustained global growth, optimism surrounding AI’s potential, and further central bank rate cuts. A recent Bloomberg survey indicated unanimous bullish sentiment among Wall Street analysts regarding the S&P 500. The consensus projects a 9% increase for the index in 2026, aligning closely with its historical average return over the last two decades. Notably, all analysts surveyed expect the S&P 500 to avoid an annual decline.
In 2025, the S&P 500 achieved an impressive gain of over 16%, despite challenges stemming from President Donald Trump’s global trade policies. The AI sector’s explosion played a crucial role in maintaining its trajectory of positive returns for the third consecutive year.
Several companies within the AI realm saw significant early trading gains, including Sandisk, Micron, Western Digital, Intel, and Constellation Energy. Their performance was buoyed by news of recent AI IPOs in Asia and a report from China’s DeepSeek suggesting more efficient development methods for AI. Major tech firms such as Nvidia, Broadcom, and Taiwan Semiconductor also saw their stock prices rise.
Additionally, home furnishing retailers like RH and Wayfair benefited from Trump’s postponement of certain tariffs on upholstered furniture, kitchen cabinets, and vanities, leading to a surge in their stock prices. Precious metals, which enjoyed remarkable annual gains in 2025, began the day higher, with gold appreciating 0.2% and silver soaring nearly 3%.
On the consumer front, crude oil prices showed signs of easing, with WTI decreasing almost 1% and Brent dropping about 0.8%. The previous year marked the most significant annual decline in crude oil prices since 2020, contributing to lower gas prices. AAA reported that the average price at gas stations had decreased to $2.83 per gallon, down from $3.06 a year prior.
Despite the positive movements in the stock market, trading volumes are expected to be lighter due to the holiday season, which typically sees thinner trading activity. Even with strong stock gains in 2025, U.S. equities faced their largest underperformance against international stocks since 2009. While the S&P 500 grew by 16%, the MSCI All Country World ex USA index, which excludes U.S. stocks, saw a remarkable increase of over 30%. In particular, South Korea’s Kospi index soared by 76%, fueled by significant contributions from Samsung and AI-driven chipmaker SK Hynix. Other global markets, including Japan’s Topix, Germany’s DAX, and the U.K.’s FTSE 100, also experienced gains exceeding 20%.
Amid this backdrop, Bank of America’s senior U.S. economist Aditya Bhave commented on a dichotomy emerging from softer labor data contrasted with strong consumer activity. He described the current market as precariously balanced and suggested a cautious forecast for the S&P 500, projecting only a 3.7% rise from its 2025 year-end position. Meanwhile, Savita Subramanian, head of U.S. equity strategy at Bank of America, acknowledged that while the forecast may not be as exhilarating as in recent years, there remain numerous opportunities for considerable upside potential in the market.
