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As we approach a new year, investors are questioning the billions spent on AI infrastructure — a main driver of U.S. stock prices in 2025 — and the U.S. economy is facing pricing and unemployment pressures. Despite those potential headwinds, declining interest rates in 2026 could support resilient corporate earnings.
Let's explore what experts say about these competing dynamics and their impact on different areas of investment in 2026.
Learn more: How to start investing: A step-by-step guide
S&P 500 in 2026: Modest returns expected
After two consecutive years of double-digit gains, the S&P 500 (^GSPC) is poised for another profitable year. Ayako Yoshioka, portfolio consulting director at Wealth Enhancement, highlighted the S&P 500’s average annual return of about 7% as a reasonable expectation for 2026. “Earnings growth is expected to be over 12%” next year, Yoshioka explained, but “elevated valuations remain a concern.” The 7% target allows room for valuations to contract slightly.
Yoshioka also expects some volatility next “as the AI theme continues to be hotly debated.” The debate centers on whether AI stocks are appropriately valued given the technology’s potential to reshape business practices across many industries.
Learn more: AI stocks could see a volatile first half of 2026. Here's why.
Small and mid-cap stocks may outperform in 2026
The small-cap S&P 600 index and the mid-cap S&P 400 underperformed large caps in 2023, 2024, and 2025 — despite some predictions that smaller companies would shine in 2025.
At least two experts believe small- and mid-cap investors may finally be rewarded in 2026. Yoshioka noted that “earnings growth in 2025 for the S&P 600 index is expected to be 18% and valuation is more reasonable” vs. large caps. Yoshioka also pointed out that if interest rates stabilize next year, mergers and acquisitions activity could pick up, which would benefit smaller companies.
David Rosenstrock, director at Wharton Wealth Planning, agreed. He added that small- and mid-cap technology and finance stocks could have a strong year, driven by earnings. Financials may benefit from “innovation and a steeper yield curve, which should improve net interest margin,” he explained. AI and digital innovation may also be key drivers, Rosenstrock continued.
Learn more: See the stocks with the highest 52-week gains
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International equities look promising in 2026
According to Crit Thomas, global market strategist at Touchstone Investments, international earnings are expected to grow in the high-single digits in 2026. He cited strong price and earnings performance from European banks as reason for optimism. Near-term conditions in the U.K. are a concern, but low valuations may provide protection and even some upside.
“Developed international equities offer long-term advantages,” said Thomas, “including lower valuations, higher dividend yields, potential currency tailwinds, and less reliance on a narrow set of U.S. megacap stocks.”
Gold
Gold’s value increased more than 50% in 2025, thanks to geopolitical tensions, strong central bank demand, and global economic uncertainty. Paul Williams, managing director at gold bullion supplier Solomon Global, expects these drivers to remain firmly in place in 2026. In other words, gold’s historic run is likely to continue. “We expect the precious metal to continue its upward trajectory and reach $5,000 per ounce by the end of 2026,” said Williams.
Learn more: How to invest in gold in 4 steps
Other analysts agree. Bank of America and HSBC researchers also predicted gold will reach $5,000 per ounce by the end of the next year. Goldman Sachs targets a year-end gold price of $4,900 per ounce.
Learn more: Thinking of buying gold? Here's what investors should watch for.
Retirement
In 2026, you may need to make some of your retirement contributions with after-tax money. If you make more than $145,000 a year and you’re over 50, your catch-up contributions must be after tax. Catch-up contributions are higher retirement plan deposit allowances for workers aged 50 and up.
Learn more: Retirement planning: A step-by-step guide
After-tax contributions, called Roth contributions, can be withdrawn tax-free in retirement, along with their associated earnings. Note that if your 401(k) does not support Roth contributions and you make more than $145,000 annually, you will be held to the standard 401(k) contribution limit without the added catch-up allowance.
In 2026, the standard 401(k) contribution limit is $24,500. The catch-up limit is $8,000. Workers aged 60 to 63 may qualify for a larger catch-up limit of $11,250.
Traditional 401(k) contributions are made with pretax funds. You pay the taxes on those later, when you withdraw funds from the account.
The 2026 IRA contribution limit is $7,500, and the IRA catch-up limit is $1,100.
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