Jefferies expects the S&P 500 to keep climbing through 2027, setting an 8,000 year-end target for 2026 and 9,000 by the end of 2027. The brokerage says stronger corporate earnings and continued AI investment can outweigh risks from inflation, higher oil prices and elevated bond yields.
Jefferies set an 8,000 year-end target for the S&P 500 in 2026, based on a forecast of 35% earnings growth and $373 in earnings per share, compared with consensus expectations for 29% growth. It sees the index reaching 9,000 by the end of 2027, supported by $450 in EPS and 20.8% earnings growth. The brokerage argues stronger-than-expected corporate earnings and continued AI investment can outweigh risks from inflation, higher oil prices and elevated bond yields.
Earnings outlook broadens beyond mega-caps
Jefferies said the earnings outlook has improved sharply this year, with consensus 2026 earnings growth rising from about 13% at the start of the year to 29%. The improvement is also broadening beyond the so-called Magnificent 7, with earnings expectations for the rest of the S&P 500 rising to about 24% for 2026.
AI remains central to the story. Jefferies estimates that companies with direct or indirect exposure to AI and data-centre investment account for about 46% of the S&P 500, with their earnings expected to grow about 60% in 2026. That growth is projected to slow to 24% in 2027, but the brokerage expects both AI-related companies and the rest of the index to keep delivering double-digit earnings growth.
Valuation stays elevated but earnings-backed
The S&P 500 trades at about 21.5 times forward earnings, while Jefferies expects its 2027 valuation target to rest on a lower 20-times multiple. As a result, the brokerage's bullish outlook does not depend on further valuation expansion.
However, higher Treasury yields remain a key risk. Jefferies noted that the 10-year Treasury yield has already risen by more than 60 basis points this year, and historically a rise of more than 100 basis points over 12 months has been associated with a contraction in equity-market multiples. Rising fiscal deficits and increased debt issuance by large technology companies could add further upward pressure on long-term yields.
Market breadth could improve into 2027
Jefferies also expects the market to broaden beyond mega-cap technology. It said only about 36% of S&P 500 stocks were outperforming the index over the 12 months through August, well below the long-term average of about 47%. Stronger earnings growth across sectors, though, could improve breadth as investors shift focus toward 2027.
Among sectors, Jefferies is overweight technology, financials, health care and materials, while it is more cautious on communication services, consumer discretionary and real estate, citing weaker earnings trends, high valuations and sensitivity to higher rates. The brokerage's 2027 scenarios span a bear case of 6,900 and a bull case of 10,500, with the main downside risk being a meaningful deterioration in earnings expectations, particularly among AI-related companies.
Source: Investing.com
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