3 reasons a top stock strategist sees a major year-end rally brewing for the S&P 500

Things are looking up for the stock market heading into the final weeks of 2026, according to Société Générale.

In a note to clients on Tuesday, the French investment bank said a confluence of bullish factors are coming together to lift stocks into 2027.

Let’s unpack them:

1. Clouds clearing for consumers

Oil prices have been one of the biggest thorns in the equity market’s side since the US-Iran war began more than eight months ago, with brent crude prices rising from $65 a barrel in February to $112 in April.

But crude prices have cooled recently, with US oil down to $86 a barrel, and Brent down to about $91, both well-below wartime peaks.

Since oil is a major input for inflation, falling prices should be a boost for consumers, who have taken a hit at the pump, the bank said. Cheaper oil should also mean less upward pressure on interest rates, another boon for consumers as well as stocks.

In addition, jobless claims are at a multi-decade low, signaling economic growth should remain strong.

2. The downward momentum trade is long in the tooth

Société Générale’s cross-asset momentum indicator — which measures the month-over-month price change in multiple asset classes — has been in a downtrend for an extended period, signaling it’s due for a turnaround.

“In duration, it has already surpassed both the oil sell-off in March and Liberation Day in April,” wrote Manish Kabra, the chief US equity strategist at the bank. “The only comparison we have is the 11-week period when the Fed went from 0% to 5% in ’22.”

3. Post-midterm clarity

Historically, investors tend to like the clarity that comes after an election outcome.

In the six months following the last 20 midterm elections, the S&P 500 has risen by an average of 12.7%, Société Générale found.

But in the nine of those elections where Democrats controlled both the House and Senate with a Republican president, the market surged 15.7%.

Plus, while AI stocks sold off after the election, it didn’t appear that investors left the market altogether; instead, they moved into other pockets of the market.

“The S&P 500 fell 2.6% despite 263 stocks rising,” Kabra wrote.

How to play the rally

Société Générale has a year-end 2026 price target of 8,000 for the S&P 500, representing 7% upside from current levels — a hefty rally over a month-and-a-half period. If oil falls to $80 a barrel, hyperscaler free cash flow levels soar, and 10-year Treasury yields drop to 4%, Kabra said the index could rise 30% to 10,000 in the coming months.

Given the broadening out of the market after the election, Kabra said to overweight the S&P 500 equal-weight index.

He also favors the utilities, which tend to rally when bond yields fall as investors look for stable, bond-like returns in the stock market.

Finally, Kabra is bullish on consumer-sensitive stocks as the Fed approaches “peak hawkishness” in early 2027. When Fed policy eases, it tends to stimulate consumer activity as borrowing costs fall.

Examples of funds that offer exposure to these trades include the Invesco S&P 500 Equal Weight ETF (RSP), the State Street Utilities Select Sector SPDR Fund (XLU), and the Vanguard Consumer Discretionary ETF (VCR).