Wall Street Bets on a "Best of Both Worlds" in 2026: Rate Cuts, AI, and Tax Reform in Resonance

BlockBeats News, January 12 — Wall Street strategists generally believe that the U.S. economy and stock market may experience a rare multi-faceted positive resonance in 2026. With expectations of Federal Reserve rate cuts, tax incentives from Trump’s “Big and Beautiful Act,” easing inflation, and productivity gains driven by AI, U.S. 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-on-year. Strategists point out that falling oil prices, easing housing costs, and the fading of one-off price increases caused by tariffs may provide more room for inflation to fall than expected. Meanwhile, a cooling job market gives the Federal Reserve policy space to cut rates within the year. Declining U.S. Treasury yields may further lower financing costs, stimulating investment and consumption.

On the fiscal side, the “Big and Beautiful Act” allows companies to accelerate 100% capital expenditure depreciation, prompting businesses to bring forward future investments to 2026. Wall Street believes this policy will significantly boost capital spending. Goldman Sachs expects that productivity gains driven by AI will push S&P 500 earnings per share (EPS) to grow by 12% in 2026. Recent data shows that U.S. labor productivity has reached its fastest growth rate in two years.

However, analysts also caution that the risk of AI replacing jobs is rising, and if it impacts the labor market, it could become a new source of instability. Overall, Wall Street views 2026 as a rare window: rate cuts, tax reform, and AI all working together, but structural divergence and potential risks still warrant caution.