2026 Outlook Summary: Riding the Wave

• Current market metrics including valuation, leverage, and sentiment don't yet reflect bubble-like euphoria, with the firm comparing today's market more to the 1960s growth boom than the 1990s tech bubble
• Base case forecasts continued AI spending momentum preventing recession, though second-year presidential cycles historically bring increased volatility
• Google searches for 'stock market bubble' hit near-record levels in Q4, which RiverFront interprets as cautious sentiment that may indicate more room for market growth

2026 Market Outlook: AI Boom Continues Without Bubble Territory

RiverFront Investment Group's 2026 outlook maintains a bullish stance on US equities, projecting continued gains driven by artificial intelligence spending, accommodative Federal Reserve policy, and recession avoidance. The firm favors US stocks over bonds and international assets.

Key Market Assessments:

• Current market conditions do not reflect bubble characteristics in valuation, leverage, or sentiment metrics
• AI-driven rally compared to two historical periods: 1990s tech bubble and 1960s growth boom
• Current phase viewed as early-stage "boom" rather than euphoric bubble territory

Base Case Projections:

• Continued upside for US stocks through 2026
• AI spending cycle expected to sustain market momentum
• Market positioned more similarly to the sustained 1960s Dow Jones growth period than the 1990s tech bubble

Risk Factors for 2026:

• Credit market conditions
• Inflation trends
• Federal Reserve policy shifts
• Presidential cycle volatility (second years historically more volatile)

Technical Indicators:

• Q4 2024 saw near-record Google searches for "stock market bubble," interpreted as contrarian bullish signal
• Nasdaq rally since ChatGPT's late-2022 release tracks below 1990s bubble trajectory
• Current sentiment reflects caution rather than euphoria

The analysis suggests the most powerful phase of the current bull market may still lie ahead, with AI productivity gains potentially driving a longer-duration growth cycle similar to the technology-led expansion of the 1950s-1960s rather than a shorter, more volatile bubble pattern.