Jefferies has issued a bullish outlook on the S&P 500, setting a price target of 8,000 points by the end of 2026 and 9,000 points by the end of 2027.
The firm believes the robust earnings growth narrative remains undervalued by the market, suggesting that subsequent upward earnings revisions could drive the index even higher. Jefferies notes that the 8,000-point target for 2026 is based on earnings per share of $373 and a price-to-earnings multiple of 21.5 times, while the 2027 baseline scenario assumes earnings per share of $450, corresponding to a 9,000-point target and a 20 times multiple.
The bank points out that the earnings outlook for U.S. equities remains positive, supported by persistently strong earnings beats and artificial intelligence-driven investment. Although oil prices, inflation, and rising 10-year Treasury yields may compress valuation multiples, these factors should not offset the compelling earnings growth story.
Jefferies identifies a key risk in a meaningful slowdown in earnings, particularly among AI-related companies, which remain the primary growth engine for the market. The firm believes earnings expectations are still underestimated and sees room for further upward revisions through 2028 following a strong second-quarter earnings season and positive management commentary. While the pace of revisions may decelerate, the firm does not anticipate earnings expectations to more than double from the start of the year as they did in 2026.
Jefferies asserts that the earnings narrative remains centered on AI, but it is no longer solely a story of the "Magnificent Seven." The market currently expects S&P 500 earnings to grow 29% in 2026, a significant increase from roughly 13% at the start of the year. While the Magnificent Seven are still expected to deliver 45% earnings growth, earnings expectations for the rest of the S&P 500 have also improved materially, with growth forecasts rising to approximately 24%.
The firm estimates that about 46% of the index has direct or indirect exposure to AI and data center spending, with these companies expected to grow earnings by 60% this year, before decelerating to 24% by 2027.
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