It’s that time of year again, when Wall Street strategists dust off their crystal balls and tell us what will happen to stocks in 2026.
The latest round, collected by the Financial Times, suggests the S&P 500 will climb about 9-10 per cent next year.
That would stretch the current run of double-digit gains to seven in eight years, despite widespread worries about AI exuberance and elevated valuations.
Too bullish? Yes, says Prof Richard Murphy, the left-wing tax campaigner with a penchant for forecasting market carnage.
“These people have massive stocks of useless products to sell. They know they are overpriced. They know they will be rumbled soon. They are talking up the price for as long as they can.
They want to flog this stuff while it is still possible”. In his telling, markets are teetering on the brink.
It is a sweeping jeremiad: 2000-level valuations, 2008-level risks, and no evidence of anything except an impending crash.
The trouble is Murphy is attacking the wrong thing.
Forecasts are indeed silly, but not because Wall Street is engaged in one last pump-and-dump.
They are silly because they are career-safe.
Strategists rarely predict disaster; nor do they predict booms. They routinely predict high single-digit returns because being a cautious bull is the least controversial place to sit.
The result is a consensus that systematically underestimates how wild equity markets actually are.
As Ben Carlson of Ritholtz Wealth Management notes, the average intra-year drawdown is 16 per cent.
Big slumps are normal. So are big gains: roughly four in every 10 years finish up more than 20 per cent. The 2020s alone have delivered +18 per cent, +29 per cent, – 18 per cent, +26 per cent, +25 per cent and +17 per cent so far in 2025 – a reminder that average years are the exception, not the rule.
So yes, markets could crash in 2026. They could also soar. Or they could do both in the same year.
That, not conspiracy, captures the neat unreality of Wall Street’s forecasts.
