Liquidity Game: Can the US Stock Market Support the "Ceiling" of the Crypto World by 2026

Wall Street’s outlook for the US stock market in 2026 presents a “mixed bag”—the divergence between optimists and pessimists is becoming increasingly apparent, and behind this prediction battle lies a profound impact on global capital flows.

Institutions Are Bullish, But Bubble Risks Are Worsening

Morgan Stanley has issued the most aggressive forecast, setting the S&P 500 target at 7,800 points by the end of 2026, an increase of about 15%, while also projecting a 17% growth in earnings per share of constituent stocks. UBS’s view is slightly more conservative, with a target of 7,500 points, an increase of over 11%. The logic supporting these optimistic expectations is clear: profit growth driven by AI investments, US tax cuts, the Federal Reserve’s easing cycle, and deregulation in energy and financial sectors.

However, warning signs are also flashing. The current US stock bubble is evident, with valuations of major tech giants approaching historical highs, and the leverage-to-market cap ratio surpassing levels seen during the 2000 dot-com bubble. Extreme predictions suggest that if the Fed’s rate cuts trigger inflation to rebound more than expected, or if rate cuts are less aggressive than anticipated, the AI-related market bubble could burst. Some even warn that the US stock market could face declines of over 40% by 2026—though such extreme forecasts lack broad support from mainstream institutions.

Sector Rotation: Opportunities for Cyclical Stocks to Rebound

The previously leading tech sector’s growth rate may gradually slow down, and small-cap tech companies relying on liquidity could even face correction pressures. In contrast, traditional cyclical sectors such as consumer discretionary, industrials, materials, and energy, which are entering the tail end of the rate-cut cycle, are poised for a rebound, with a potential rally on the horizon.

Key Insights for the Crypto World: Liquidity Is the Decisive Force

The relationship between US stocks and the crypto market is fundamentally a game of liquidity flow. During easing cycles, US stocks attract institutional capital first, and the wealth effect from rising stocks will draw spillover funds into the crypto asset market, with Bitcoin, Ethereum, and others becoming the main recipients of this liquidity wave.

But this “rising tide lifts all boats” scenario is not guaranteed. When liquidity tightens, US stocks will turn into “vampires” in the crypto world—massive stock ETFs can firmly absorb global capital, and funds that might have flowed into crypto assets will instead shift toward blue-chip US companies, causing the crypto market to face liquidity constraints.

The trajectory of the US stock market in 2026 will not only determine the rise or fall of equities but also influence the allocation of global capital across different assets. For crypto participants, the key is not to predict the absolute level of the US stock market but to understand the logic of liquidity flows—this is the true key to grasping the movements of BTC, ETH, BNB, and other cryptocurrencies.