Key Points
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The S&P 500 is expected to deliver single-digit gains in 2026, ending a three-year streak of double-digit returns.
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Small-cap and mid-cap stocks, alongside renewable energy stocks, are predicted to perform well in the new year.
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Increased market volatility is anticipated due to uncertainty surrounding the mid-term elections.
In 2026, the S&P 500 index is projected to shift from recent double-digit gains to single-digit returns, influenced by strong economic and corporate earnings, while avoiding a major market sell-off. Investors may feel disappointed after being accustomed to a strong bull market since late 2022.
Small-cap stocks, such as Mirum Pharmaceuticals, are expected to thrive, with significant growth anticipated from their products. Moreover, renewable energy stocks like Brookfield Renewable and Clearway Energy are anticipated to continue their upward trajectory, driven by ongoing demand for energy, particularly in data centers, despite potential political challenges during the mid-term elections.
Historically, the stock market experiences increased volatility during mid-term election years, and 2026 is likely to follow this trend. Democrats may gain seats, which could influence cannabis legislation and offer potential benefits to companies like Green Thumb Industries and Trulieve Cannabis.
