Five Big Predictions for Stock Market Performance in 2026 -- Which Companies Could Deliver Outsized Returns

What to Expect: A Market Reshuffling Ahead

Looking forward to 2026, the investment landscape appears poised for significant shifts from recent years’ playbook. After examining market trends and economic fundamentals, here are five predictions that could reshape which stocks deliver the biggest gains:

Prediction 1: S&P 500 Growth Slows to Single Digits

The broad market index has now posted double-digit annual returns for three consecutive years—an exceptional streak. However, 2026 may be the year this run ends. Rather than forecasting a crash, the more likely scenario involves moderate positive returns in the single digits.

While the underlying economic fundamentals and corporate earnings remain reasonably healthy, investor expectations have been significantly elevated by the exceptional bull run since late 2022. This reset in expectations could lead to smaller gains, even though the absolute direction remains upward. Many market participants accustomed to big double-digit annual returns may find single-digit performance underwhelming—despite it still representing solid annual gains.

Prediction 2: Small and Mid-Cap Stocks Take the Spotlight

After years of dominance by the largest technology companies and a strong 2025 for international equities, the prediction here is that smaller companies finally capture investors’ attention in 2026.

One compelling small-cap opportunity worth monitoring is Mirum Pharmaceuticals (NASDAQ: MIRM), which saw its share price nearly double during 2025. The pharmaceutical company’s flagship treatment, Livmarli, continues showing commercial momentum. More significantly, 2026 should bring positive Phase 2 study results for volixibat in treating primary sclerosing cholangitis—a rare liver disease.

Additionally, Mirum’s recent acquisition of Bluejay Therapeutics positions the company to benefit from Phase 3 trial results expected in the second half of 2026. These catalysts suggest another strong year ahead for this small-cap player, particularly if investors rotate capital away from mega-cap names toward companies with genuine growth catalysts.

Prediction 3: AI Evolution Shifts from Hype to Tangible Results

While many observers worry about an artificial intelligence bubble ready to burst, the more plausible scenario involves a meaningful transition: companies must now demonstrate concrete returns on their AI investments. The era of AI speculation is transitioning to the era of AI execution.

Alphabet (NASDAQ: GOOG, GOOGL) stands well-positioned for this shift. The company’s Google Cloud division continues gaining competitive ground in cloud infrastructure. Beyond that, agentic AI—autonomous systems that can operate independently—represents a significant growth vector for 2026. Google Cloud’s infrastructure capabilities, particularly custom processors designed for AI workloads, should capture growing demand from enterprises seeking to deploy advanced AI systems. This technological advantage could translate into accelerating revenue growth for Alphabet’s cloud operations and overall company performance throughout the year.

Prediction 4: Renewable Energy Stocks Rally Continues

Despite a less favorable regulatory environment under the current administration compared to the previous one, renewable energy stocks surged in 2025 and that momentum should persist into 2026.

Companies like Brookfield Renewable (NYSE: BEP, BEPC) and Clearway Energy (NYSE: CWEN) benefited from strong performance last year and face even better conditions ahead. The fundamental driver: AI infrastructure expansion demands enormous amounts of electricity. Data centers required to run AI applications consume vast power quantities, and solar and wind generation represent economically attractive solutions for providing that energy, regardless of the political climate.

Even administrations skeptical of renewable energy subsidies recognize the basic economics: renewables offer cost-effective power for the massive data centers sprouting across the nation. This energy demand creates a powerful tailwind for renewable energy operators and should drive continued appreciation for both Brookfield Renewable and Clearway Energy in 2026.

Prediction 5: Election-Year Volatility Followed by Recovery

2026 is a mid-term election year in the United States, which historically correlates with above-average stock market volatility during much of the year. However, this volatility typically represents an opportunity rather than a crisis—once election uncertainty resolves, markets tend to move meaningfully higher.

Historically, the opposition party gains congressional seats in mid-term contests, potentially resulting in Democrats retaking the House of Representatives and possibly the Senate. While divided government typically limits new legislation, one area showing bipartisan potential involves the cannabis industry. Recent executive action on marijuana rescheduling, combined with longstanding Democratic support for expanding banking services to cannabis operators, could produce legislative action.

If such reforms pass following the November elections, companies like Green Thumb Industries (OTC: GTBIF) and Trulieve Cannabis (OTC: TCNNF) could emerge as major winners in the final months of 2026. Expanded access to financial services would represent a transformative development for cannabis operators currently hampered by banking restrictions.

The Bottom Line on 2026 Predictions

The coming year appears likely to deliver meaningful but not explosive market gains, with significant opportunity concentrated outside the megacap technology stocks that dominated recent years. Small-cap companies with genuine growth catalysts, renewable energy operators, and emerging artificial intelligence beneficiaries should attract investor capital. Meanwhile, political uncertainty could create tactical volatility that ultimately resolves into higher stock prices once the mid-term elections conclude.