TLDR
- Jefferies expects the S&P 500 to reach 8,000 by the end of 2026 and 9,000 by the end of 2027.
- The 2027 target is based on projected earnings per share of $450 and a 20 times forward earnings multiple.
- AI and data center-linked companies represent about 46% of the index, according to Jefferies.
- The firm expects earnings growth to broaden beyond the Magnificent Seven.
- Higher Treasury yields, inflation, oil prices and weaker AI-related earnings are the main risks to the forecast.
Jefferies expects the S&P 500 to continue rising through 2027, with the investment bank setting a year-end target of 9,000 for the benchmark index.
The forecast follows a year in which corporate earnings expectations have increased sharply, helped by strong technology profits and continued spending on artificial intelligence.
Jefferies also expects the market’s earnings growth to spread beyond the largest technology companies.
Jefferies Targets 8,000 in 2026 and 9,000 in 2027
Jefferies has set an S&P 500 target of 8,000 for the end of 2026.
That forecast is based on expected earnings per share of $373 and earnings growth of about 35%.
The broader consensus estimate is closer to 29% growth.
For 2027, Jefferies expects earnings per share to climb to $450.
The bank says that level of earnings could support an S&P 500 target of 9,000 using a 20 times valuation multiple.
That is below the roughly 21.5 times forward earnings multiple the index trades at now.
Jefferies therefore does not expect its 2027 forecast to depend on investors paying a much higher valuation for stocks.
The bank also laid out a wide range of possible outcomes for 2027, including a lower scenario of 6,900 and an upper scenario of 10,500.
AI Spending Remains Central to Earnings Growth
Artificial intelligence remains one of the main drivers behind the earnings outlook.
Jefferies estimates that companies with direct or indirect exposure to AI and data center investment account for about 46% of the S&P 500.
Those companies are expected to deliver earnings growth of roughly 60% in 2026.
That pace is expected to slow to around 24% in 2027.
The Magnificent Seven are projected to deliver about 45% earnings growth in 2026.
However, the rest of the S&P 500 is also expected to post growth of about 24%.
Jefferies said that broader earnings strength could improve market participation after a period in which gains were concentrated in a smaller group of stocks.
Only about 36% of S&P 500 companies outperformed the index in the 12 months through August, below the historical average of around 47%.
Treasury Yields and Inflation Remain Risks
Jefferies said higher bond yields remain one of the main risks to its outlook.
The 10-year Treasury yield has risen more than 60 basis points this year.
Historically, an increase of more than 100 basis points over 12 months has often been linked with lower equity valuation multiples.
Inflation and higher oil prices could also keep pressure on interest rates.
Jefferies is more positive on technology, financial services, healthcare and materials.
It is more cautious on communication services, consumer discretionary and real estate because of weaker earnings trends, high valuations or sensitivity to borrowing costs.
The firm’s 9,000 target ultimately depends on corporate profits continuing to grow, particularly among companies tied to AI and data center spending.
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