The AI supercycle and earnings revisions are expected to send the S&P 500 (^GSPC) higher this year, but the path to getting there won’t be a straight line, JPMorgan strategists said.
The firm’s mid-year global research outlook report, released on Wednesday, notes that with the United States and Iran working toward a peace deal, “we are approaching our “Blue Sky” scenario and increasing our S&P 500 year-end price target to 7,800.”
The firm previously forecast the index would reach 7,600. The new target represents nearly a 6% increase from Tuesday’s close. But the road to getting there may be bumpy, with several hurdles still to clear.
JPMorgan strategists expect the Federal Reserve to keep interest rates steady through 2026 before eventually pivoting to rate hikes in 2027. The firm anticipates that stock market leadership will remain highly concentrated in large-cap Quality Growth and direct AI plays.
The outlook warns that speculative momentum trading in secondary AI stocks has become so extreme that the market “is at risk of a reversal and continues to face high probability of a flash-crash.” A flash crash occurs when there is a sudden, steep drop in asset prices, usually followed by a rebound.
Still, the strategists said “the fundamental backdrop remains strong and investors should use technical weakness as a buying opportunity.”
JPMorgan raised its 2026 S&P 500 EPS estimate to $350, representing a 29% year-over-year surge. The upgrade is driven by an unprecedented wave of upward earnings revisions and a near doubling of AI-related capital expenditure budgets among technology hyperscalers.
The firm said its credit card spending metrics indicate that consumer fundamentals are holding up, even as company commentary points to a more bifurcated, value-conscious consumer rather than broad-based strength.
The S&P 500 (^GSPC) is up nearly 8% year-to-date, and 16% from the March 30 lows. Most of the gains have come from the Tech (XLK) sector, which is up 27% since the start of the year, with semiconductor stocks leading.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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