Citi's strategist Scott Chronert has projected that the S&P 500 will reach 8,100 by the end of 2026, reflecting a more than 9.5% increase from its recent close. This revision from a previous target of 7,700 is based on expected earnings of $350 per share in 2026, rising to $400 in 2027, largely fueled by advancements in artificial intelligence.
Chronert noted that while the first quarter saw unusually high earnings surprises, he anticipates a larger-than-normal positive surprise rate in upcoming quarters, although not at the same level as before. He emphasized that earnings growth will be the primary driver of the index's performance moving forward, rather than valuation expansion.
Despite potential volatility from geopolitical tensions and inflation concerns, Chronert believes that investor focus will remain on AI spending, suggesting that the market is still in the early stages of capitalizing on AI's growth potential.
He also indicated that both trailing and forward price-to-earnings ratios are expected to moderate, placing greater emphasis on earnings growth to influence index price movements