Societe Generale Securities 2026 US Stock Outlook: Continuing to strengthen, technology is still the leader. There are no surprises in the non-technology market

The Zhitong Finance App learned that Societe Generale Securities released a research report saying that US stocks are expected to continue to strengthen in 2026, and EPS is the main driving force behind the S&P 500 index. Under a neutral situation, the Federal Reserve cut interest rates twice, the economy made a soft landing, and the AI narrative continued to be realized as profit. EPS grew 12% and PE remained unchanged. Corresponding to the S&P 500 index, it was still able to achieve a 12% increase. Under an optimistic situation, the Federal Reserve compromises with Trump. Interest rates are cut four times in 2026, the economy is strong and AI is fueled, inflation remains moderate, and EPS grows 14%, then the index will have more room to rise. Under pessimistic circumstances, the risk of inflation has returned, the Federal Reserve's monetary policy has been forced to contract, risk-free interest rates and risk premiums have risen, and index returns are negative.

Societe Generale Securities's main views are as follows:

1. Fundamental outlook for US stocks in 2026: the US economy has a soft landing, and the AI wave is the core engine of economic growth

The fire of the era of AI investment — which is expected to maintain intensity and spread. 1) AI-related capital expenditure contributed 0.9 percentage points to the year-on-year growth rate of US real GDP in the second quarter of 2025. Compared to the Internet wave, there is still room to increase investment in information processing equipment and software as a share of GDP. From the bottom up, tech giants will continue to maintain a high level of capital expenditure. 2) The 2026 AI investment boom is expected to expand further from computing power to power infrastructure.

Increased fiscal policy easing and the Federal Reserve's interest rate cuts have led to a moderate recovery in traditional US demand. 1) According to estimates by CRFB and other agencies, the US fiscal deficit rate for the 2026 fiscal year will still increase by about 0.3 percentage points compared to the 2025 fiscal year, reaching 5.9%. 2) The Federal Reserve's interest rate cut will also drive a moderate recovery in traditional demand. Financial conditions for low-income groups are expected to improve marginally, and industries that are highly sensitive to interest rates, such as the real estate chain, will usher in marginal improvements.

2. Liquidity outlook: When water is released again, the Fed's easing may exceed expectations, but inflation or long-term bond interest rates may be variables

US easing in 2026 is likely to exceed expectations, and the federal government's debt pressure has become a core variable affecting interest rates in the medium to long term. US federal government debt leverage continues to rise and has reached the highest level in history. In 2024, interest expenses on US Treasury bonds have reached 1.13 trillion US dollars, and their share of GDP has climbed to 3.1%. President Trump will have stronger claims to influence the Federal Reserve to push interest rates downward. In addition to interest rate cuts in 2026, other monetary easing policies are also worth looking forward to, including restarting unconventional operations such as asset purchases (QE) or yield curve control (YCC).

The expansion of US debt drives capital expenditure and will cause interest rates on US long-term bonds to rise, but Japan and Europe's “worse” or the Federal Reserve's adoption of YCC may lower interest rates on long-term bonds. 1) If the Federal Reserve cuts interest rates beyond expectations, the US economy is stronger under such circumstances, and long-term interest rates will be difficult to lower, driven by rising term premiums. 2) As long-term US inflation expectations rise, fiscal deficits rise and credit risk is repriced, long-term interest rates are likely to remain volatile in a high range. 3) The momentum to reduce long-term interest rates on US bonds in 2026 may come from purchases in Japan and Europe, or the Federal Reserve's adoption of YCC.

3. AI technology is the fire of the times. It will not be easily extinguished in 2026. The release of water from the Federal Reserve is expected to boost the spread and transpiration of AI

The wave of AI technology will become America's “Noah's Ark” to maintain long-term economic competitiveness in the era of great power games, and a “rigid bubble” with intertwined interests. 1) Use history as an example and refer to the Star Wars plans in the 80s. In an environment of great power games and high debt, the current US is less able to withstand the impact of a recession or the bursting of an asset bubble than in the past 30 years. 2) Whether the AI wave can continue will directly determine whether the US can maintain its lead in the global technology field, which in turn will affect global confidence in the US economy and the US dollar, affect US sovereign debt risk, and even determine whether the US government's “MAGA” can make dreams successful. The US government has a stronger will to use national efforts to win the AI technology competition, similar to the enhanced and extended versions of the Internet wave in the 90s.

The core reason for reverting to the collapse of the Sci-Net bubble in 2000 was that the Federal Reserve raised interest rates and continued tightening of liquidity, leading to the bursting of the Internet bubble, which relied on debt financing to “burn money” but continued to find no effective business model.

Looking ahead to 2026, the Federal Reserve's interest rate cut will boost the spread of AI technology and transform traditional industries. Macro level: In the current environment where the US government's debt is high and the fiscal deficit continues to expand, technology is America's way to break the game. Industry level: Currently, the AI industry is still in the stage of rapid technological iteration, and the application side continues to be implemented. Funding level: The Federal Reserve may be more relaxed than expected. The balance sheet of the leading leader in AI investment is healthy, and the risk of capital chain breakdown is lower than in 2000.

4. 2026 US stock market outlook: US stocks continue to strengthen, technology is still the leader. There may be surprises in the non-technology market

US stocks are expected to continue to strengthen in 2026, and EPS is the main driving force behind the S&P 500 index. Under a neutral situation, the Federal Reserve cut interest rates twice, the economy made a soft landing, and the AI narrative continued to be realized as profit. EPS grew 12% and PE remained unchanged. Corresponding to the S&P 500 index, it was still able to achieve a 12% increase. Under an optimistic situation, the Federal Reserve compromises with Trump. Interest rates are cut four times in 2026, the economy is strong and AI is fueled, inflation remains moderate, and EPS grows 14%, then the index will have more room to rise. Under pessimistic circumstances, the risk of inflation has returned, the Federal Reserve's monetary policy has been forced to contract, risk-free interest rates and risk premiums have risen, and index returns are negative.

The valuation of US stocks is at a historically high level, and the risk premium continues to be low. Amid concerns about the AI bubble theory, the volatility of the US technology stock market will increase in 2026. 1) Currently, the S&P 500 valuation is at a historically high level, and the risk premium is at an historically low level, but under the support of a “double broad” fiscal and monetary policy, and the expectation of increasing total factor productivity brought about by superimposing AI narratives, the probability of drastically killing the valuation is also small. 2) However, the current low risk premium rate and high valuation system is essentially based on the three elements of “loose policy expectations - higher growth expectations - technological innovation premiums”. Disturbances in any of these areas may trigger the market to gradually reassess risk premiums. In particular, if the Federal Reserve cuts interest rates beyond expectations, we need to be wary of a new consensus on worsening US inflation in the second half of 2026, thus driving the risk premium back up.

Main investment line 1: Technology is still the leader and rotates around industry trends. 1) In 2026, the technology sector will continue to be the core engine of profit growth in the entire market due to efficiency improvements and new business growth brought about by AI. 2) The AI wave has continued for nearly three years, spreading from computing power infrastructure to applications and the entire industry chain (small-scale AI, utilities, etc.). 3) In 2026, we will continue to rotate around industry trends and focus on more definitive directions in the “bubble theory.” The software side will shift from the “arms race” in the early stages to “commercial implementation,” and Internet giants with ecological advantages and strong cash flow strength have wider moats. The hardware side, on the other hand, went from “full deployment” to a “deep technical zone.” Competition in the chip sector is evolving at an accelerated pace, and Nvidia's leading position is difficult to shake in the short term; the storage industry will maintain a tight balance in 2026. There are gaps in expectations at the critical infrastructure level. As data centers move into the gigawatt (GW) era, power security and liquid cooling will become new systemic bottlenecks.

Main investment line 2: profit recovery+AI proliferation. There may be surprises in the non-technology market. Focus on consumption, raw materials, etc. whose performance in 2025 lags behind the 20-year average. 1) The improvement in corporate profits is expected to spread from technology to a wider range of industries. The Federal Reserve's interest rate cut in 2026, another expansion of fiscal policy, a soft economic landing, and a reduction in the impact of tariffs will drive a broader profit recovery. 2) The valuation gap between M7 and non-M7 has been at the central level for a long time. Historically, significant widening of the valuation gap between M7 and non-M often occurred when liquidity was extremely relaxed or long-term interest rates declined rapidly. In 2026, given the limited room for long-term interest rates to decline, the further expansion of the valuation gap may not be obvious. 3) AI is expected to provide a profitable engine for traditional industries. In 2026, with marginal improvements in the macro environment, the market is expected to spread further to upstream resource industries such as copper. More and more non-technology companies are disclosing the contributions of AI in financial communication, such as industry, finance, consumer goods, healthcare, etc.

Risk warning: The risk of a game between major powers, the risk of US monetary policy exceeding expectations, and the risk of a decline in global economic growth exceeding expectations.