HSBC lifts S&P 500's year-end target to 8,100 on earnings strength

On September 8, HSBC increased its year-end target for the S&P 500 to 8,100 from 7,650, anticipating strong corporate earnings and continued investment in AI infrastructure to drive the benchmark index's rally. This upgrade suggests a potential 4.9% gain from the index's recent closing price. HSBC projects earnings per share (EPS) growth of over 25% in the second half of 2026.

In the recent quarter, 86% of the 492 S&P 500 companies that reported earnings beat analysts' estimates, compared to an average of 67.5% over the long term. The S&P 500 has surged 12.75% this year, enduring volatility due to Middle East conflicts and uncertainty over the Federal Reserve's stance on interest rates amidst persistent economic growth and inflation.

Despite ongoing concerns about potential Fed rate hikes, geopolitical instability, U.S. midterm elections, and increased liquidity needs from IPOs and AI spending, HSBC contends these issues are overstated. However, HSBC acknowledges that investor sentiment and equity valuations remain unpredictable, with technology stocks trading within a tight valuation range despite robust earnings and record margins, hinting at the challenge of achieving higher valuations.

Major global brokerage firms, such as Goldman Sachs, Morgan Stanley, and Citigroup, also foresee the S&P 500 closing the year at or above 8,000.