<\/p>\n
Wall Street spent the bulk of 2026 figuring out whether the stock market has come too far, too fast.<\/p>\n
However, according to TheFly, Citi analysts are looking past the immediate damage as they revamp their S&P 500 target.<\/p>\n
They make the case that something far more durable may be taking shape, specifically a robust profitability cycle driven by heavy AI infrastructure spending.\u00a0<\/p>\n
For perspective, stock market gains typically come from a couple of places.<\/p>\n
Investors can either pay more for the same level of earnings, pushing prices higher, or businesses can actually make a lot more money, offering a sturdier foundation.\u00a0<\/p>\n
Citi\u2019s Scott Chronert is leaning heavily on the latter.<\/p>\n
His updated S&P 500 forecast hinges on genuine, sustainable earnings growth, a thesis that could potentially revitalize Wall Street.\u00a0<\/p>\n
Moreover, it comes at a point where the markets are dealing with renewed inflation worries, Middle-East related tensions, and higher rate fears.<\/p>\n
For context, the S&P 500 closed Friday, June 5, at 7,383.74, down 200.57 points, or 2.64% after hitting a record close of 7,609.78 on June 2.<\/p>\n
The big drop on Friday was linked to a stronger-than-expected May jobs report, which showed the U.S. economy adding 172,000 jobs. The report fueled some major concerns about the Federal Reserve keeping interest rates higher for longer.<\/p>\n
Chip stocks took the hardest hit, with the Philadelphia Semiconductor Index losing north of $1 trillion in value according to Reuters, with Nvidia, Intel, AMD, and Broadcom among the losers.<\/p>\n
Over the past three months, though, the trend has been mostly positive.<\/p>\n
The S&P 500 was up 553.03 points, or 8.10%, since March 5, despite the Friday debacle.<\/p>\n
Citi analysts, though, feel it\u2019s more of a temporary blip, with Citi forecasting that the AI spending wave becomes large enough to efficiently reshape the market\u2019s earnings power.<\/p>\n
Citi raised its 2026 S&P 500 target, citing stronger earnings and AI-driven growth prospects<\/p>\n
Michael M. Santiago / Getty Images<\/p>\n
Wall Street price targets for the S&P 500Deutsche Bank: 8.000.Goldman Sachs: 8,000.Morgan Stanley: 8,000.UBS Global Wealth Management: 7,900.Barclays: 7,650.J.P. Morgan: 7,600.Citi\u2019s S&P 500 call leans on stronger earnings\u00a0<\/p>\n
Chronert and his team raised the bank\u2019s year-end 2026 S&P 500 target to 8,100, up from 7,700.\u00a0<\/p>\n
More Wall Street:<\/p>\n
JPMorgan resets S&P 500 price target for the rest of 2026Vanguard challenges the S&P 500 as a one-stop strategyGoldman Sachs resets Broadcom stock forecast<\/p>\n
That\u2019s a 400-point increase, or a 5.2% increase from the previous forecast.<\/p>\n
Chronert\u2019s case is purely built on the strength of earnings, and he now expects the S&P 500 index-level earnings to surge to an eye-catching $350 in 2026, with early estimates of $400 in 2027.\u00a0<\/p>\n
S&P 500 earnings over the past 5 years<\/p>\n
Using S&P 500 operating EPS as the index-level earnings measure, here\u2019s how the S&P 500 has performed over the past five years:<\/p>\n
2020: $122.37.2021: $208.21.2022: $196.95.2023: $213.53.2024: $233.36.2025: $263.61.
\nSource: Standard & Poor\u2019s\/S&P Dow Jones Indices data via YCharts and GuruFocus.<\/p>\n
That offers strong visibility for the index even if valuation multiples stop growing.<\/p>\n
Anyone who follows the stock market has heard about the AI bubble like a broken record, and has spent time worrying about when it might burst.\u00a0<\/p>\n
The AI trade has been criticized for being too dependent on investor enthusiasm.<\/p>\n
In fact, in a recent post, I covered Fed President Mary Daly, who said that 2027 could be a litmus test for AI stocks and noted that many of the promised productivity gains have yet to come to fruition.\u00a0<\/p>\n
However, Citi\u2019s view is that AI infrastructure spending is feeding directly into corporate fundamentals, especially for the top names in tech.<\/p>\n
Chronert said that the market\u2019s tremendous growth cluster currently represents 45% of the S&P 500 earnings weight, up from 15% roughly three decades ago.\u00a0<\/p>\n
That essentially means that the businesses most exposed to AI spending carry a lot more influence than they previously did.\u00a0<\/p>\n
On top of that, Citi expects price-to-earnings multiples to drop as the AI cycle matures.\u00a0<\/p>\n
For some color, the S&P 500 is currency trading at a remarkably elevated valuation at a trailing P\/E at about 25.6 according to GuruFocus, while FactSet puts the forward 12-month P\/E at 21.1, comfortably above the 5-year average of 19.9.\u00a0<\/p>\n
S&P 500 year-end closes2025: 6,845.50 (+16.39% from 2024).2024: 5,881.63 (+23.31% from 2023).2023: 4,769.83 (+24.23% from 2022).2022: 3,839.50 (-19.44% from 2021).2021: 4,766.18 (+26.89% from 2020).
\nSource: YCharts.<\/p>\n
Related: Bank of America resets Broadcom stock price target after earnings<\/p>\n
#Citi #quietly #resets #SampP #price #target #rest<\/p>\n","protected":false},"excerpt":{"rendered":"
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