Barclays and Stifel raised their year-end targets for the S&P 500 index to 7,800 on Tuesday, citing strength in corporate earnings. The target is about 4.4% higher than the index’s last close of 7,472.79.
“The equity bull case remains intact, but earnings and AI capex visibility must do more of the work as Fed support fades,” Barclays analysts led by Venu Krishna said in a note.
The S&P 500 is up 9.2% so far this year, broadly driven by AI optimism, while the U.S.-Iran peace deal has also boosted investor sentiment.
The revised targets add to a growing wave of bullish calls from brokerages, with some expecting the index to cross the 8,000 mark. However, rising inflation concerns and a strong labor market have triggered fears of rate hikes by the U.S. Federal Reserve that could dent equity performance.
Apart from potential higher borrowing costs, concerns around massive AI budgets and consumer spending also linger, Barclays said, as it maintained its “negative” stance on the consumer space.
Barclays also lifted its S&P 500 earnings-per-share forecast to $337 from $321 for 2026 and also set a 2027 index target of 8,800. The brokerage said improving visibility around the technology earnings outlook and a firmer industrial backdrop were helping offset concerns around consumer spending.
“The rebound in equities following the U.S.-Iran détente reinforces the market’s resilience, but we believe yields are re-centering as a key risk factor for equities,” Barclays said.
Barclays also changed its U.S. sector views, downgrading financials to “neutral” and upgrading healthcare to “neutral.”
While Stifel equity market strategist Thomas Carroll also sees strong earnings as the primary catalyst for stocks to run higher, he also sees continued signs of a rotation out of megacap stocks that have been a primary driver for the run in stocks to record highs.
“Stock concentration sits at 40-year highs and peaking dispersion signals a rotation out of mega-caps into equal-weight indices,” Carroll said. With a U.S. economy that is “running hot,” Carroll prefers staying long investment cyclical sectors such as energy, industrials, materials and select semiconductors and computer hardware.