Bank of America predicts that the S&P 500's strong rally will fade in 2026.

According to Odaily Planet Daily, Bank of America believes that after three consecutive years of double-digit returns, the U.S. stock market has limited room to provide excess returns in 2026. The bank predicts the S&P 500 will likely close around 7,100 points in December, only about 4% higher than Tuesday's (December 2nd) closing price. While double-digit earnings growth is expected for U.S. companies, stock price returns will be lackluster. Savita Subramanian, head of equity and quantitative strategies, acknowledges the risks but does not anticipate a crash; compared to 2000, current investors have lower equity allocations, earnings growth supports returns, and there is less extreme enthusiasm for speculative stocks.