Will the 2026 US stock market rally bring us "fish" or "bear's paw"? Wall Street provides the answer

Wall Street’s latest outlook has gone viral: the US economy in 2026 may experience a rare “perfect storm.” Once the three major engines—rate cuts, tax reforms, and AI productivity gains—fire together, can the US stock market truly achieve both growth and stability?

Why the Threefold Positive Outlook Makes US Stocks Favorable

Let’s look at the data: the latest CPI year-over-year remains around 2.7%, oil prices have fallen, and housing costs are easing, leading to expectations that inflation could decline more than anticipated. What does this mean? The Fed has more reasons to cool the labor market, and the policy space for rate cuts this year is fully open.

The key point—once US Treasury yields decline, corporate financing costs immediately follow suit. The math is simple: cheap money + policy support = a dual boost to investment and consumption.

The “Sweet but Dangerous” Fiscal Weapon

Trump’s “Big and Beautiful Act” plays a significant role here. The policy of 100% accelerated depreciation for corporate capital expenditures is clever—sending a signal to companies: bring forward investments originally planned for 2027-2028 to 2026. Wall Street predicts this will significantly boost capital spending growth.

Goldman Sachs is even more straightforward: AI-driven productivity improvements will push S&P 500 earnings per share (EPS) to grow by 12% in 2026. And reality is confirming this forecast—US labor productivity has achieved its fastest growth in two years.

The “Bear Claw” Is Not So Easy to Grab

But the story isn’t all positive. Analysts are sounding alarms: the risk of AI replacing jobs is accelerating. If shocks to the labor market create negative feedback, rising unemployment could backfire on consumption. Once this structural divergence appears, the originally “win-win” scenario could turn into a game where some lose.

Overall, 2026 is indeed a rare window. But whether you can “catch the fish” or just “grab the bear paw” depends on how well Wall Street manages these variables—whoever fails first in rate cuts, tax reforms, or AI productivity gains will be the one to break the balance.