Even with uncertainty creeping into the US economy, 2025 has been yet another stellar year for the S&P 500. America’s flagship index is up just shy of 17%. And for index investors who have been reinvesting dividends, the total gain is closer to 18.1% – almost double its long-term historical average of 10% a year.
However, as experienced investors know, past performance is not a strong indicator of future results. And with economic pressure heating up, can this market momentum really continue next year? Here’s what the experts are saying.
Bulls versus bears
As always, there is a mix of opinions among experts, each with justifiable reasons behind their bullish or bearish stance.
On the side of the optimists, Deutsche Bank and Oppenheimer have highlighted the surprising resilience of the US economy despite a softer labour market and tariff disruptions. And when combined with the earnings tailwinds and expected spending of large-cap tech giants, their models predict the S&P 500 could climb to as high as 8,100 points.
That’s about 18.3% higher than current levels, suggesting another year of blockbuster returns could be just around the corner.
However, on the opposite end of the spectrum lies Bank of America. While it remains relatively bullish on the US economy, it’s only projected the S&P 500 to reach 7,100p, implying that 2026 could be an underperformer as businesses try to catch up to their lofty valuations.
And as part of its more extreme bear-case scenario, the index could tumble to as low as 5,500 points if AI spending suddenly grinds to a halt or earnings disappoint.
What should investors do now?
Looking at all the expert forecasts, the average consensus suggests that 2026 will likely be a slower year for the leading US index. However, that doesn’t mean there aren’t any opportunities to take advantage of, especially for stock pickers. And one company that’s recently caught my attention is Domino’s Pizza (NASDAQ:DPZ).
Similar to Domino’s here in the UK, the US pizza chain has struggled to deliver growth as demand for fast/casual restaurants has waned. And subsequently, the US stock has underperformed over the last 12 months, tumbling by almost 9%.
However, looking at its latest results, analysts are starting to wonder if the business has reached a cyclical turning point. The success of its ‘Best Deal Ever’ promotional campaign appears to have resonated well, driving improved US sales through both volume and higher ticket prices.
At the same time, efforts to optimise operations and bolster efficiency seem to be paying off, with its supply chain profit margin climbing to 11.3% in the latest quarter, up from 10.6% a year ago. Combine all this with a historically-low forward price-to-earnings ratio of 22.3, and Domino’s shares could be getting ready for a comeback next year.
Input cost inflation remains a prominent threat, particularly for cheese and wheat, potentially offsetting its recent margin gains. And if wider economic conditions take a sudden turn for the worse, discretionary takeout spending’s likely to be among the first things consumers will cut back on.
Nevertheless, its undemanding valuation combined with comeback potential makes this a business worth investigating further, in my opinion. And it’s not the only US stock I’ve got my eye on right now.
