S&P 500 Targets Keep Getting Raised. Why Strategists Are Feeling So Confident.

Wall Street’s outlook for markets has improved since tariffs were announced this spring. (TIMOTHY A. CLARY/AFP via Getty Images)

Second-quarter earnings season begins in earnest this week with bank results, but strategists are already feeling increasingly confident about the year as a whole for the S&P 500.

At least three major firms have lifted their year-end S&P 500 price targets this month alone—in one case as high as 6,600—based on factors like increased earnings, economic resilience, and less worry about tariffs.

RBC Capital Markets Head of U.S. Equity Strategy Lori Calvasina was the latest to do so on Monday, raising her target on the index by 9%, to 6,250 from 5,730.

Of course that basically embeds no further growth for the index this year, and reflects the fact that Calvasina is neutral on stocks in the second half, given ongoing uncertainty. The move basically takes RBC’s target back to where it was in mid-March before the tariff debacle sent markets swooning, and the firm’s earnings per share estimate for the year remains unchanged at $258.

However others are more optimistic. Last week Bank of America’s Savita Subramanian boosted her year-end S&P 500 target to 6,300 from 5,600. She, too, notes that there’s no shortage of risk and uncertainty, but highlights that companies have shown themselves able to navigate plenty of ups and downs in recent years. “Volatility in currency, inflation and rates have failed to rattle S&P 500 margins since COVID—corporates either adapted or dropped out of the index,” she wrote.

BofA’s increase came alongside that of Goldman Sachs’ David Kostin, who raised his year-end target to 6,600 from 6,100. “The strength of first-quarter earnings results boosted our confidence,” he wrote, and expects “the digestion of tariffs to be a gradual process, and large-cap companies appear to have some buffer from inventories ahead of the increase in tariff rates.”

Strategists’ upbeat outlooks for the index mirror that of individual stocks. In fact, according to data from Bloomberg, analysts raised price targets for stocks in nine of the S&P 500’s 10 sectors last week, increasing the aggregate estimate for the benchmark index by 0.8%. Financials were the big winner, seeing a 2.4% increase.

Bloomberg’s most recent compilation of strategists’ targets hasn’t been updated for July yet, but as of June the data showed that among the 20 firms tracked, the median year-end target was 6,025, with Wells Fargo at the high end with 7,007 and Stifel at the low end with 5,500.

Investors might be concerned that the market has gotten too complacent, given the continuing risk around U.S. policy, trade, and economic data.

However, Trivariate Research Founder Adam Parker argues that ongoing productivity gains from artificial intelligence can fuel above-average profit growth through the end of the decade. The S&P 500’s long-term EPS growth has been around 9% a year, making the idea of 10% or 11% growth thanks to AI gains quite reasonable, which would put the S&P 500 around the 10,000 mark.

Of course, plenty can happen to the stock market between now and then. Yet for now, with an increasing number of strategists feeling good about the bull market’s third year and another relatively strong earnings season teed up, it’s easy to see why estimates and investors’ moods are on the rise.

Write to Teresa Rivas at teresa.rivas@barrons.com