Wells Fargo (WFC) has joined the ranks of Wall Street institutions offering bullish projections for the S&P 500 (^GSPC) in 2026.

Darrell Cronk, President and Chief Investment Officer of Wells Fargo Investment Institute, stated on Tuesday that the bank expects the benchmark index to reach 7,400-7,600 points within the next year, implying potential gains of up to 11%. This upward trajectory is anticipated to be driven by multiple factors, including consumer spending, AI investments, and regulatory easing.

Cronk remarked, "If we fast-forward to this time next year, we believe market returns by the end of 2026 will be quite robust, though the path upward won’t be entirely smooth."

The index closed at 6,840 points in Tuesday's trading session.

According to data compiled by Sam Ro of TKer, several institutions have already issued optimistic outlooks for the S&P 500 in 2026, with target ranges between 7,100 and 8,000 points. Wells Fargo’s forecast further reinforces this positive sentiment.

Year-to-date, the S&P 500 has risen by 16%, following gains exceeding 20% in both 2023 and 2024. If this year’s performance holds, it would mark the third consecutive year of double-digit growth.

Should the rally continue, it would represent the sixth time in seven years that the S&P 500 has posted annual gains of at least 15%, with four of those years seeing increases above 20%.

The Wells Fargo team identifies three key drivers likely to propel stock prices higher over the next year: declining interest rates, the benefits of the AI investment cycle, and increased consumer spending fueled by larger tax refunds under the Trump administration’s "Outstanding Big Beautiful Bill Act" (OBBBA).

Cronk highlighted that provisions in the OBBBA will deliver consumers one of the highest tax refunds in decades by next spring, significantly boosting purchasing power.

"Beyond consumer spending, corporate capital expenditures, factory construction, and depreciation allowances will also contribute," Cronk added. "We estimate these business expenditures will approach $230 billion, providing strong support for U.S. corporate profit margins and earnings next year."

Historical data shows that when the S&P 500 trades near all-time highs, Fed rate cuts tend to elicit positive market responses. Wells Fargo noted that since 1984, the Fed has cut rates 20 times while the index was within 2% of its record high—each instance was followed by a 12-month rally, yielding a 100% success rate.