Wolfe Research is keeping a positive view on U.S. stocks for the back half of 2026, arguing that a combination of falling oil prices, continued earnings resilience and sustained spending on artificial intelligence should support additional market appreciation. The firm says these forces should be sufficient to offset persistent geopolitical and monetary policy uncertainties that could otherwise weigh on sentiment.
The research house remains overweight technology, with a particular emphasis on semiconductors. Wolfe expects markets to make gradual gains into the summer as lower energy costs relieve some pressure on consumer wallets. The firm also believes that any retracements are likely to be transient, provided that the healthy pace of retail fund inflows continues. It singled out renewed U.S.-Iran tensions or an erosion of diplomatic progress as key downside scenarios that could produce sharper pullbacks.
Wolfe noted that technology has reasserted itself as the top-performing sector in 2026, taking the lead from energy after the reopening of the Strait of Hormuz pushed oil prices downward. AI-related capital spending remains firm, the firm said, and semiconductor firms are reaping benefits from a wave of upward earnings revisions. Momentum, it added, continues to outpace other common investment factors.
In assessing market leadership, Wolfe highlighted that 33 of the S&P 500's 50 best-performing stocks this year are technology names. The report emphasized that technology and communication services are becoming more concentrated within the index, with a relatively small number of large-cap companies driving a large share of earnings growth.
Looking at earnings drivers for 2026, Wolfe expects technology - and semiconductors in particular - to be the principal engine of profit expansion. The firm identified a group of large-cap companies that it expects to contribute disproportionately to forecast earnings growth, listing Nvidia, Micron, Broadcom, Microsoft, Alphabet, Meta, Amazon and Apple.
On monetary policy, Wolfe acknowledged that uncertainty has increased with Kevin Warsh's arrival as Federal Reserve chair. Still, the firm expects the Fed to ultimately maintain its current policy stance rather than enter a prolonged tightening cycle. It argued that the decline in oil prices should help moderate inflation over the remainder of the year, even as the Fed remains relatively hawkish in tone.
Wolfe also judged that AI investment will remain intact despite signs that corporate spending decisions are becoming more disciplined. Businesses, the firm said, are shifting emphasis from maximizing AI token usage toward improving returns on investment. At the same time, hyperscale data center spending appears to be accelerating: Wolfe reported that 2027 capital expenditure estimates for major cloud providers have risen sharply this year.
Beyond AI and semiconductors, the firm outlined several additional market themes it expects to shape the second half of 2026. These include continued passive ETF inflows that support narrow market leadership; resilient earnings revisions led by AI-related companies; a rebound in manufacturing activity; stable credit markets; robust initial public offering issuance; and the potential for a Japanese yen carry-trade unwind to create market disruption.
Wolfe concluded by acknowledging a set of risks that could undermine its constructive view. These risks include a higher-for-longer interest rate environment, the possibility of renewed geopolitical disruptions and pressure on financial-sector stocks. Nevertheless, the firm judged market fundamentals to be broadly favorable: valuations outside the largest technology companies appeared reasonable and supportive of further equity gains, according to the report.
Clear summary
Wolfe Research expects U.S. equities to continue rising in the second half of 2026, led by technology and semiconductors, supported by easing oil prices, resilient earnings and sustained AI-related investment, while noting monetary and geopolitical risks.
Key points
- Technology - especially semiconductors - is the preferred sector, with a small group of large-cap tech companies driving a disproportionate share of earnings growth.
- Lower oil prices and continued retail fund inflows are seen as supporting market breadth and consumer resilience, limiting the duration of any pullbacks.
- Hyperscale data center capex and disciplined but persistent AI spending underpin upward earnings revisions for semiconductor and AI-related companies.
Risks and uncertainties
- Renewed U.S.-Iran tensions or a breakdown in diplomatic progress could trigger sharper market declines, particularly affecting energy and broader equity sentiment.
- Higher-for-longer interest rates remain a downside risk, with potential negative consequences for financial stocks and valuation-sensitive sectors.
- Concentration of market leadership within a handful of mega-cap technology and communication services firms could increase vulnerability to sector-specific shocks.