JPMorgan raised its S&P 500 year-end 2026 target from 7,600 to 7,800, representing approximately a 6% increase from the index's recent closing level of about 7,365.46. The bank also raised its 2026 S&P 500 earnings per share forecast to $350 and expects it to reach $390 in 2027.
AI spending drives upward revision of profit expectations
JPMorgan stated that one of the main factors driving the upward revision of its target is the continued expansion of AI infrastructure investments by major technology companies. The bank believes that the broad-based upward revisions to corporate earnings expectations are sufficient to support higher index valuations.
Data shows that S&P 500 companies are projected to report a 28.9% year-over-year earnings growth in the first quarter of 2026. Meanwhile, capital expenditures by hyperscale cloud providers related to AI have nearly doubled.
JPMorgan expects market leadership to remain focused on large-cap quality growth stocks and companies directly benefiting from AI investments. The bank also noted that credit card spending data indicates U.S. household expenditures remain resilient, but management commentary suggests consumers are becoming more price-sensitive.
Expectations have been raised ahead of the Q2 earnings season.
Even with the raised target, JPMorgan cautioned that the subsequent movement of U.S. equities may not be smooth. The bank noted that momentum trading in some second-tier AI-related stocks has become overheated, with valuations and positions rising faster than fundamentals, increasing the risk of a rapid market correction.
The row also noted that two consecutive quarters of strong performance have significantly raised market expectations for the second-quarter earnings report. This means it is becoming increasingly difficult for companies to continue exceeding expectations on profitability and capital expenditure guidance.
Other risks listed by JPMorgan include increased equity issuance, slower-than-expected decline in inflation, tariff pressures, and the potential for monetary policy to tighten again. The bank expects the Federal Reserve to hold interest rates steady through 2026 and begin raising them in 2027.
Predictive markets are gaining momentum simultaneously
As Wall Street institutions progressively raise their target levels, trading around predictions for the S&P 500 index has intensified. On Polymarket, the probability of the S&P 500 reaching 7,800 points once reached 59%.
Meanwhile, Cboe Options Exchange has launched Cboe Predicts, offering binary options contracts linked to the Mini-S&P 500 Index. Traders can place “yes or no” bets on whether the index will be above or below a specific level, and trading is currently available through Interactive Brokers, with plans to expand to Charles Schwab in the future.
In addition to JPMorgan, Barclays and Stifel have also raised their S&P 500 year-end 2026 target to 7,800, while BCA Research increased its target from 7,700 to 8,100.