TLDR
- Evercore ISI sets a base case S&P 500 target of 7,750 for year-end 2026, with a 30% chance of a bull case reaching 9,000.
- AI-driven gains in tech, communication services, and consumer discretionary stocks are the key drivers of the bull case.
- RBC Capital has a 12-month target of 7,900, implying roughly 7.7% upside from early May levels.
- RBC expects any market pullback to stay in the 5–10% range, with a deeper correction only likely if recession fears return.
- Both firms see AI as a major earnings split: RBC models 28% earnings growth for AI-focused stocks versus 6% for the rest of the index.
Two major Wall Street firms have laid out their S&P 500 forecasts for the rest of 2026. Both are broadly positive but say investors should expect some bumps along the way.
Evercore ISI: A Wide Range of Outcomes
Evercore ISI analyst Julian Emanuel sees the S&P 500 ending 2026 at 7,750 in his base case. But he also puts a 30% probability on a bull case that would push the index all the way to 9,000.
Emanuel says the market is being shaped by two big forces colliding: a tech-driven bull market fueled by AI, and sweeping changes in the global geopolitical landscape. He says this combination creates a much wider range of possible outcomes than normal.
He compared the current moment to the 1920s and 1990s, pointing to what he called “warlike stimulus, surging M2, and a productivity shock” colliding with an AI revolution. He expects productivity growth could hit 3% by the end of the decade.
Evercore recommends buying long-dated call options on what it calls the “AI Class of 2026” stocks and the QQQ exchange-traded fund to capture potential upside. At the same time, the firm suggests using a collar strategy on the S&P 500 fund to hedge against near-term risks from oil prices and interest rates.
Emanuel also flagged a limitation of AI itself. He said large language models tend to cluster around consensus views and underestimate extreme outcomes. That means lasting value will come from deep domain expertise and owning full workflows, not just using AI tools.
RBC Capital: Steady Climb With Speed Bumps
RBC Capital’s head of U.S. equity strategy, Lori Calvasina, set a 12-month price target of 7,900 for the S&P 500. That implies about 7.7% upside from early May levels.
Calvasina said the path higher won’t be a straight line. She expects pullbacks of 5–10% at some point but does not see a deeper correction of 14–20% unless recession fears come back into play.
RBC’s model is built on what it calls an “AI in the fast lane, Middle East in the slow lane” scenario. The firm assumes 28% earnings growth for AI-focused companies in 2027, compared to just 6% for the rest of the index.
The model also trims overall earnings estimates by 5% and assumes inflation stays around 3.3%, with the Federal Reserve on hold and 10-year yields at 4.5%. If inflation rises to 3.8% and the Fed hikes rates, RBC says its fair value estimate drops to the 7,400–7,500 range.
Near-term risks the firm flagged include earnings downgrades tied to war impacts, profit-taking in semiconductor stocks, midterm election uncertainty, and higher interest rates.
RBC maintained a preference for growth stocks over value, and U.S. equities over international markets.
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