Wall Street's bullish mood shows no signs of cooling off. Wells Fargo just tossed its hat into the optimistic ring for 2026, forecasting the S&P 500 could climb to somewhere between 7,400 and 7,600 next year. That would represent roughly an 11% gain from today's levels, and it's another signal that the current market rally might have more runway than skeptics expect.

Darrell Cronk, president and CIO of the Wells Fargo Investment Institute, laid out the case during a recent press briefing. He pointed to three main drivers: resilient consumer spending, continued investment in artificial intelligence infrastructure, and the possibility of deregulation under the new administration. The path upward won't be smooth, he cautioned, but the destination looks promising.

For ETF investors, this translates into continued optimism around the big three S&P 500 trackers: SPDR S&P 500 ETF Trust (SPY), Vanguard S&P 500 ETF (VOO), and iShares Core S&P 500 ETF (IVV). These funds have been riding one of the strongest bull runs in modern market history, and if Wells Fargo is right, there's more upside ahead.

The Analysts Were Right This Time

It's worth remembering where we started. Heading into 2025, Wall Street was nearly unanimous in its bullishness. According to Financial Samurai data from December 2, 2024, not a single bearish forecast was on record. Most firms predicted the S&P 500 would finish 2025 around 6,500. Well, the index has already blown past that target with a couple of weeks still left in the year.

The S&P 500 is up 17% so far in 2025, setting up what would be a third straight year of double-digit returns. That follows back-to-back rallies exceeding 20% in both 2023 and 2024. It's the kind of streak that makes financial historians take notice.

SPY, VOO, and IVV have all participated in the rally, though investor behavior underneath tells an interesting story. Despite strong performance, SPY actually experienced outflows of about $4.8 billion, while VOO pulled in a massive $122 billion and IVV added $30 billion. The trend suggests investors are gradually shifting toward lower-cost options for long-term S&P 500 exposure, even as market sentiment remains firmly positive. Regardless of the flow dynamics, strong demand has kept all three funds moving higher.

Looking ahead to 2026, the bullish forecast should benefit all three funds roughly equally, despite these under-the-hood differences in investor preferences.

For those hunting for alternatives beyond the standard trio, Invesco S&P 500 Equal Weight ETF (RSP) could be worth watching. This fund gives equal weight to all S&P 500 constituents rather than market-cap weighting, which means it could outperform if the index's smaller names start catching up to the mega-cap leaders. There are also factor-based options like State Street SPDR Portfolio S&P 500 Growth ETF (SPYG) and State Street SPDR Portfolio S&P 500 Value ETF (SPYV), which let investors tilt toward specific market characteristics depending on their view of what's working.

AI and Semiconductors Could Steal the Show

Wells Fargo specifically called out AI investment as a key growth driver, which puts thematic ETFs back in the spotlight for 2026. Invesco QQQ Trust (QQQ) tracks the Nasdaq-100 and offers heavy exposure to the technology sector's biggest names. That means it captures the AI momentum coming from companies like Apple Inc. (AAPL), Microsoft Corp (MSFT), and Nvidia Corp (NVDA).

Semiconductor-focused ETFs could deliver even more concentrated exposure to the AI infrastructure buildout. The iShares PHLX Semiconductor ETF (SOXX) and VanEck Vectors Semiconductor ETF (SMH) both target the chip companies that are essential to AI development. If the AI investment thesis continues to play out as Wells Fargo expects, these funds could potentially beat the broader market.

Balancing Act: Core Holdings Plus Satellite Bets

Here's the thing about thematic ETFs: they come with more volatility than broad-market funds. Semiconductor stocks can swing wildly based on earnings reports, supply chain news, or shifts in AI spending patterns. That makes them exciting when things are working, but potentially painful when sentiment turns.

The smart approach for most investors is treating broad-market ETFs like SPY, VOO, or IVV as the core portfolio foundation. These funds provide stable, diversified exposure to the entire S&P 500. Then, for those who want to amplify their exposure to specific growth themes, AI and chip-focused funds can serve as smaller, high-octane satellite positions.

The outlook for 2025 and 2026 keeps equities in the favorable zone, even if we hit some bumps along the way. For most investors, the big three S&P 500 ETFs remain the simplest and most cost-effective way to participate in what's shaping up to be one of the strongest multi-year rallies in decades. Carefully layering in thematic exposure on top of that core gives you a shot at capturing additional growth if the AI story continues accelerating without abandoning diversification entirely.