Bank of America’s year-end target for the S&P 500 is 7,100, while Citi has raised the year-end target to 8,100 from 7,700.
- Bank of America strategist Savita Subramanian has warned that U.S. stocks are flashing “too many red flags,” according to a CNBC report.
- Citi’s Chronert has said that future market gains are likely to be driven by earnings growth rather than by higher valuations, according to Barron’s.
- Rob Haworth, senior investment strategist at U.S. Bank Asset Management Group, has also upgraded the S&P 500 forecast to 8,040 by the end of the year.
Wall Street analysts are increasingly divided on the outlook for the benchmark S&P 500 index even as it has rallied to fresh all-time highs in recent weeks, driven largely by gains in artificial intelligence-related and technology stocks.
Bank of America is reportedly pointing to “too many red flags” over U.S. stocks, with its year-end target for the index at 7,100, indicating about a 6% downside from current levels, according to a CNBC report.
However, Citi’s Scott Chronert has reportedly raised the year-end S&P 500 target to 8,100 from 7,700 to reflect higher earnings expectations, as per a report from Barron’s.
Markets are also pricing in the optimism from mega IPOs planned this year, with Elon Musk’s SpaceX and Sam Altman’s OpenAI slated to go public.
BofA’s Bear Case For S&P 500
Bank of America strategist Savita Subramanian has warned that U.S. stocks are flashing unusually many bear-market signals, with seven of its 10 tracked indicators triggered in May, up from five in April and four in March. The strategist highlighted that this is the same average level seen before bear markets since 1990.
The analyst pointed to extreme concentration in the technology sector, where the performance gap between top- and bottom-performing stocks has reached levels comparable to those of the dot-com bubble.
“We see opportunity in S&P 500 stocks, but not the overall cap-weighted index,” Subramanian wrote to clients on Friday, as per the CNBC report.
Citi Cites AI-Driven Earnings Power
Meanwhile, Citigroup strategist Scott Chronert has raised the year-end S&P 500 target amid a boost in earnings forecasts. Chronert said he expects S&P 500 earnings per share to reach $350 in 2026, up from $320 at the start of the year. The analyst also expects $400 in earnings for next year.
Chronert has reportedly cited ongoing AI tailwinds for his “high confidence in continued earnings beats” at least through the end of 2026.
According to Chronert, future market gains are likely to be driven by earnings growth rather than higher valuations, with AI-related spending helping offset concerns about inflation, interest rates, energy prices, and geopolitical risks.
“While macro conditions certainly matter, the fact is that the breadth of the AI-related ecosystem is broadening beyond just tech. So, while ongoing concerns regarding the Iran conflict, oil/energy prices, inflation, and interest rates are all potential volatility drivers, it is [the] underlying fundamental trajectories associated with AI spend that remain the focus for now. Other sectors matter, just not to the same degree,” he said.
Although the analyst warned that AI-driven spending will eventually decelerate, if not decline, he does not believe it will happen soon. Chronert has said that while investors “need to acknowledge some degree of deceleration (if not decline) in spending will eventually set up for an equity market hangover effect,” he added that “it is not currently in the line of sight.”
“Between here and there, the focus will eventually turn to the ability of corporate America to prove out the productivity promise which is associated with AI,” Chronert said, as per the report.
It is worth noting that Citigroup is one of the investment banks participating in the upcoming SpaceX IPO, which is expected to have a valuation of roughly $1.75-$1.8 trillion.
Meanwhile, Rob Haworth, senior investment strategist at U.S. Bank Asset Management Group, has also upgraded the S&P 500 forecast to 8,040 by the end of the year, citing reasonable price-to-earnings multiples, strong AI-led economic activity, and a highly resilient consumer market, as per an interview with CNBC.
S&P 500: What Does Retail Think?
On Stocktwits, retail sentiment around the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, has stayed ‘bullish’ over the past month.
Meanwhile, the Vanguard S&P 500 ETF (VOO) has seen sentiment drop to ‘neutral’ from ‘bullish’ territory over the past 24 hours, and the iShares Core S&P 500 ETF (IVV) sentiment has improved from ‘bearish’ to ‘neutral’ over the same period.
The S&P 500 has gained more than 23% in the past year and closed at 7,405.73 on Monday. Meanwhile, the Dow Jones Industrial Average has gained about 19% in the same time.
The tech-heavy Nasdaq has been the best-performing among benchmark indexes, driven higher by AI-related gains.
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