Wall Street Bets on 2026 "Getting the Best of Both Worlds": Rate Cuts + AI + Tax Reform Resonance

On January 12, Wall Street strategists generally believe that the US economy and stock market may experience a rare confluence of multiple positive factors in 2026. Under the combined effects of Federal Reserve rate cuts, Trump’s “Big and Beautiful Act” tax incentives, declining inflation, and AI-driven productivity improvements, US stocks are expected to continue their upward trend. The market is currently focused on the latest CPI data, which is expected to remain at 2.7% year-over-year. Strategists point out that falling oil prices, easing housing costs, and the fading of one-time price increases caused by tariffs could lead to greater downward pressure on inflation than anticipated. Meanwhile, a cooling labor market provides the Federal Reserve with policy space to cut interest rates within the year, and declining US Treasury yields could further reduce financing costs and stimulate investment and consumption. On the fiscal side, the “Big and Beautiful Act” allows companies to accelerate depreciation on 100% of capital expenditures, encouraging firms to bring forward future investments to 2026. Wall Street believes this policy will significantly boost capital spending. Goldman Sachs forecasts that AI-driven productivity gains will push the S&P 500’s earnings per share (EPS) to grow by 12% in 2026. Recent data shows that US labor productivity has already experienced its fastest growth in two years. However, analysts also warn that the risk of AI replacing jobs is rising; if it impacts the labor market, it could become a new source of instability. Overall, Wall Street views 2026 as a rare window of opportunity: simultaneous rate cuts, tax reforms, and AI advancements, but structural divergence and potential risks still warrant caution.