Interactive Brokers' Chief Strategist Steve Sosnick has set a year-end target of 6,500 for the S&P 500, implying a roughly 3% decline from current levels—a notably cautious stance compared to Wall Street's bullish consensus. Sosnick outlined his contrarian view, citing historical trends to justify his conservative approach.
Historical data plays a pivotal role in Sosnick’s analysis, particularly the impact of presidential cycles. He noted, "Only two bear markets in history occurred during the second year of a presidential term," referencing the February 2018 "Volmageddon" event as an example of turbulence during such periods.
Sosnick also expressed concern about new Federal Reserve chairs often facing early-term challenges. Citing examples like Alan Greenspan (who confronted the 1987 crash shortly after taking office) and Ben Bernanke (who navigated the financial crisis early in his tenure), he stated, "New Fed chairs typically face market tests within their first year."
On the AI-driven rally, Sosnick questioned its sustainability, warning that a pullback in leading sectors could outweigh the benefits of sector rotation. "These companies have propelled the market upward rapidly, but any decline—or even stagnation—would require massive capital rotation to offset the impact," he cautioned.
Recent market action appears to validate his concerns. Despite strong earnings, Broadcom’s stock fell sharply (down ~5%), suggesting even fundamentally sound stocks face pressure amid broader market adjustments.
Sosnick also highlighted peculiar pre-market patterns, dubbing pre-dawn futures surges "Pluto rallies" due to their lack of follow-through in regular trading. He speculated that holiday-driven shifts in institutional selling could alter this dynamic.
Notably, Interactive Brokers stands among the few Wall Street firms bearish on 2026 U.S. equities. Other major banks have largely projected continued gains for the S&P 500, driven by AI investment momentum, monetary easing, and broadening earnings growth.
UBS recently forecast the S&P 500 to reach 7,300 by mid-2026 and 7,700 by year-end, citing economic resilience, falling rates, and AI enthusiasm. Citi set a baseline target of 7,700, acknowledging heightened volatility but expecting earnings and policy support to sustain the bull market. Its bull/bear scenarios ranged from 8,300 (aggressive growth) to 5,700 (downturn).
JPMorgan projected 7,500 for end-2026, with potential to breach 8,000 if Fed rate cuts persist. Deutsche Bank, targeting 8,000, predicted 14% EPS growth to $320, anticipating AI-driven gains beyond the "Magnificent Seven" into financials and cyclicals. Morgan Stanley and HSBC echoed optimism with 7,800 and 7,500 targets, respectively, while Barclays cited tech strength and improving policy conditions for its 7,400 outlook.