HSBC on Monday raised its year-end target for the benchmark S&P 500 index to 7,650, up from its prior call of 7,500, attributing the revision to persistent earnings growth across the index. That new target implies roughly 3.4% potential upside from the indexs Friday close of 7,398.93.
U.S. equities have moved to fresh highs in recent weeks, fuelled by investor enthusiasm around artificial intelligence investments and expectations of continued earnings strength. The S&P 500 finished April with its largest monthly percentage advance since November 2020, underscoring the momentum behind the rally.
HSBCs forecast includes an expectation of about 20% earnings-per-share growth for the S&P 500 in 2026, equivalent to approximately $325 per share for the index. The brokerage highlighted that the so-called "Magnificent Seven" megacap technology companies remain a dominant force in driving overall gains.
First-quarter earnings for the S&P 500 are on track to rise nearly 29% year over year, with much of that increase led by Wall Streets AI-focused heavyweight companies, according to LSEG I/B/E/S data cited by HSBC.
At the same time, HSBC strategists cautioned that while earnings provide solid support for equity prices, market sentiment is less secure. "While earnings remain supportive, sentiment is on shakier ground," the strategists said, noting that the recent advance has been relatively narrow in breadth.
Most individual stocks still trade below their 52-week highs, the strategists said, implying that broader participation would be necessary for a more durable advance. They added that the index could exceed 8,000 points if a series of conditions came together: stronger valuations in technology names - potentially tied to lofty IPO valuations - a rebound in underperforming sectors, a wider diffusion of AI-driven earnings growth across industries, and a favourable economic backdrop.
HSBC also acknowledged a macro risk that has not dented markets so far: concerns that elevated oil prices stemming from the Middle East conflict could feed into inflationary pressures. The firm did not change its view on that risk, but flagged it as a factor that could affect sentiment and the economic environment.
Summary: HSBC lifted its year-end S&P 500 target to 7,650 on the back of resilient earnings growth, heavy concentration of gains among megacap AI-related tech firms, and strong recent market performance, while warning that sentiment and rally breadth remain vulnerable.