Banking institution HSBC announced Monday it has increased its year-end projection for the S&P 500 stock market index to 7,650 points, up from its earlier forecast of 7,500, as corporate earnings continue showing strength.
American stock markets have reached new record levels in recent weeks, powered by enthusiasm surrounding artificial intelligence investments and expectations for continued strong corporate profit growth. This momentum has overshadowed worries that elevated oil costs stemming from Middle Eastern tensions could drive up inflation.
The S&P 500 finished April with its strongest monthly percentage increase since November 2020.
HSBC’s revised projection suggests the index could climb approximately 3.4% above its Friday closing value of 7,398.93 points.
The financial firm anticipates earnings per share for the index will grow roughly 20% by 2026, reaching $325, with the so-called “Magnificent Seven” large technology companies expected to continue generating significant gains.
First-quarter earnings for S&P 500 companies are projected to increase nearly 29% compared to the same period last year, largely driven by major technology firms focused on artificial intelligence, according to data from LSEG I/B/E/S.
“While earnings remain supportive, sentiment is on shakier ground,” HSBC strategists noted, pointing out that the recent market surge has been concentrated among relatively few stocks.
The majority of individual stocks continue trading below their highest levels over the past 52 weeks, indicating potential for additional growth if more companies participate in the rally, the strategists explained.
HSBC analysts suggested the index could potentially exceed 8,000 points if technology company valuations strengthen further – possibly boosted by high-value initial public offerings – while coinciding with improvement in underperforming market sectors, broader artificial intelligence-driven earnings growth across various industries, and supportive economic conditions.
