8,500-point extreme emerges! Two top strategists set a bullish S&P 500 target, with strong earnings as the core support.

Title context: 8,500-point extreme emerges! Two top strategists set a bullish S&P 500 target, with strong earnings as the core support. Text: Note that market watchers may disagree on how interest rates affect the S&P 500 Index, but they are more optimistic about the stock market's direction than before. Savita Subramanian of Bank of America is one of the top stock market bears, and she raised her target for the benchmark index previously the lowest target on Wall Street while warning that the index remains vulnerable to interest rate risk. With the S&P 500 up more than 11% this year, Michael Purves, CEO and founder of Tallbacken Capital Advisors, does not believe rising rates will end this rally. Subramanian, head of U.S. equity and quantitative strategy at Bank of America, raised her year-end forecast from 7,100 to 7,400, implying a 2.9% decline from the S&P 500's Monday close. According to a survey of more than 20 strategists, her forecast remains one of the most bearish on Wall Street. She expects the S&P 500 to reach 7,800 over the next 12 months, only 2.4% above the latest close. Tallbacken's Purves raised his year-end target from 7,400 to 8,500 to reflect "exceptionally strong" earnings growth. The new target exceeds the current highest Wall Street forecast held by Ed Yardeni, president and chief investment strategist at Yardeni Research, and implies the S&P 500 will rise about 12% from Monday's close. Raising Targets U.S. stocks fell on Monday as leaders of major artificial intelligence companies called for slowing the pace of development, putting them at odds with the Trump administration and Wall Street. The 10-year U.S. Treasury yield briefly rose above 5% for the first time since 2023, driven by market concerns that high oil prices, inflation, and the resulting rise in borrowing costs will hit the U.S. economy. Investors are now waiting for the Federal Reserve's rate decision on Wednesday, with interest rate swap traders largely having priced in a 25-basis-point hike. Earnings Growth Subramanian remains cautious about inflation risks and Fed rate hikes, and noted that any catalyst pushing financing costs further higher from already tight levels could "accelerate the arrival of pain." She also said the stock market is "long overdue for a pullback." Subramanian said this is because there has been only one 5% pullback in 2026, in March, while there are usually three per year. She added that 50% of her bear market signals have already been triggered. In Purves's view, this stock market rally is "on solid footing." He also pushed back on concerns that changes in interest rates will lead to an earnings decline, saying the correlation between the two is extremely low. Purves said that, in the end, earnings growth is "exceptionally strong, sustainable, and broad-based." "Combined with modest multiple expansion, the S&P 500 can easily reach the 8,500 area, and perhaps even higher." Subramanian is equally optimistic about earnings growth. In addition to viewing productivity as a long-term bullish case for the S&P 500, she said earnings are "not the problem." She expects earnings per share growth of 33% in 2026 and 12% in 2027, "with growth outpacing what macroeconomic forecasts suggest, supported by AI capital spending, manufacturing, and productivity." She is also less worried about the risk that Democrats could win a landslide in this year's midterm elections and thereby challenge AI spending, noting that the related buildout is being driven more by state governments in red states (Republican-governed states). The target revisions follow a wave of forecast upgrades by other Wall Street firms. A JPMorgan strategist team led by Dubravko Lakos-Bujas raised its S&P 500 target to 8,000 in August, and Yardeni soon afterward raised his own target to 8,400.