Wall Street Bets on 2026 "Having Your Cake and Eating It Too": Interest Rate Cut + AI + Tax Reform Synergy

By: theblockbeats.news|2026/01/12 10:16:10

BlockBeats News, January 12th, Wall Street strategists generally believe that in 2026, the U.S. economy and stock market may experience a rare multiple favorable resonance. Supported by the Federal Reserve's interest rate cut expectations, Trump's "Big and Beautiful Act" tax incentives, easing inflation, and AI boosting productivity, U.S. stocks are expected to continue their upward trend.

The market is currently focused on the latest CPI data, with expectations for a year-on-year maintenance at 2.7%. Strategists pointed out that the decline in oil prices, easing housing costs, coupled with the one-time price increase effect brought about by tariffs fading, may lead to a more significant-than-expected downward space for inflation. At the same time, the cooling off of the labor market provides the Federal Reserve with policy space for an interest rate cut during the year, potentially further lowering U.S. bond yields to reduce financing costs, stimulate investment, and consumption.

On the fiscal side, the "Big and Beautiful Act" allows a 100% accelerated depreciation of capital expenditures for businesses, driving companies to bring forward future investments to 2026. Wall Street believes that this policy will significantly boost capital expenditure. Goldman Sachs expects that AI-driven productivity gains will drive the S&P 500 earnings per share (EPS) to grow by 12% in 2026. Recent data shows that U.S. labor productivity has seen its fastest growth rate in two years.

However, analysts also caution that the rising risk of AI replacing jobs could become a new source of instability if it impacts the labor market. Overall, Wall Street sees 2026 as a rare window: interest rate cuts, tax reforms, and AI working together, but structural differentiation and potential risks still need to be monitored.

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