U.S. stocks and the broader economy appear positioned for continued growth heading into 2026, though several major hurdles must be cleared for the bull market to persist, according to RBC Wealth Management’s Global Insight 2026 Outlook released Thursday.

“There’s reason to be optimistic, but the conditions for a sustained bull market are demanding,” said Kelly Bogdanova, vice president and portfolio analyst at RBC Wealth Management–U.S.

'AI 2.0 MUST DELIVER'

“The economy and corporate profits need to keep growing at a healthy pace, ‘AI 2.0’ must deliver tangible productivity gains, and the market has to avoid the average 22% midterm-year correction. It’s a tall order, but the market has jumped over high hurdles before,” Bogdanova added.

RBC says expectations for S&P 500 earnings growth in 2026—currently at 12.8% year-over-year per Bloomberg consensus—may be too high, but still thinks low double-digit growth is achievable. The firm also forecasts U.S. GDP growth of 2.2% next year.

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Questions about whether artificial intelligence is in bubble territory are likely to linger. While surging capital expenditures and potential power-supply constraints raise concerns, Bogdanova says current conditions amount to “yellow warning signs rather than a full-fledged bubble.”

The firm advises investors to stay nimble and monitor portfolio risks. Bogdanova recommends beginning the year with emphasis on healthcare and defensive dividend-growth stocks.

3% INFLATION

After a strong performance in 2025, bond markets may see softer returns in 2026. RBC expects the Federal Reserve to hold interest rates steady for most of the year. With core inflation likely remaining above 3% and unemployment projected to rise modestly to 4.6%, there is little room for rate cuts.

“Given minimal expected Fed easing, improving growth, and inflation still above target, we see room for modestly higher yields,” said Tom Garretson, senior portfolio strategist for RBC Wealth Management–U.S. “That would pressure bond prices and total returns.” RBC projects the 10-year Treasury yield will end 2026 at 4.55%, up from 4.06%.

Credit markets could also face challenges due to limited yield premiums over Treasuries and higher bond issuance from tech companies financing AI investments. Municipal bonds may hold value in longer durations but look less attractive after recent gains.

LOOKING TO 2049

The report also examines the major economic themes set to shape the next quarter-century:

Trends likely through 2049:
• Continued ascent of China
• Expanding global middle class
• Deglobalization and a multipolar world
• Power-based geopolitical order
• Advances in tech, AI, and productivity
• Demographic crunch
• Reduced U.S. exceptionalism
• Rising fiscal concerns
• Climate change and peak oil demand
• Renewed momentum for non-U.S. developed economies

Overall, RBC’s outlook sees room for optimism in 2026—so long as the economy, corporate earnings, and AI-driven productivity continue moving in the right direction.