Jefferies: S&P 500 Index expected to target 8,000 by end-2026, with a potential rise to 9,000 by end-2027.

Jefferies released a research report stating that it holds an optimistic view on the S&P 500 Index, expecting a target price of 8,000 by end-2026, based on 21% earnings per share growth; it forecasts a target of 9,000 by end-2027, more than double the historical average. The bank's bullish outlook on equities is driven by a strong earnings story, which it believes is still underestimated by the market and will be materialized through upward revisions. Although oil prices, inflation, and rising 10-year U.S. Treasury yields could compress multiples, they should not offset the impressive earnings story. Jefferies pointed out that, supported by persistently stronger-than-expected earnings growth and AI-driven investment, its 2026 target of 8,000 for the S&P 500 is based on $373 earnings per share and a 21.5x multiple, while its 2027 base case assumes $450 earnings per share corresponding to a 9,000 target, a 20x multiple. The key risk will be a meaningful slowdown in earnings, especially among AI-related companies, which remain the market's main growth engine. The bank believes earnings expectations are still underestimated by the market. Following a strong second-quarter earnings season and positive management commentary, it sees room for further upward revisions through 2028. Although the pace of revisions may decelerate, it does not expect earnings expectations to more than double from the start of the year as they did in 2026. Jefferies believes the earnings story remains centered on AI, but it is no longer just a Magnificent 7 story. The market now expects S&P 500 earnings to grow 29% in 2026, up sharply from about 13% at the start of the year. While the Magnificent 7 are still expected to deliver 45% earnings growth, earnings expectations for the rest of the S&P 500 have also improved substantially, with growth forecasts rising to about 24%. The bank estimates that about 46% of the index has direct or indirect exposure to AI and data center spending, and these companies are expected to see 60% earnings growth this year, decelerating to 24% in 2027.