HSBC lifts S&P 500 year-end target

Investing.com -- HSBC lifted its year-end 2026 target for the S&P 500 to 8,100 from 7,650 in a note to clients on Tuesday, citing stronger-than-expected corporate earnings.

Strategist Nicole Inui said the increase was driven primarily by earnings, with first-half 2026 earnings-per-share growth running close to 40% and expansion expected to continue at a 25%-plus pace in the second half.

The bank forecasts full-year 2026 earnings growth of 33%, or $360, and applies a price-to-earnings multiple of 22.5 times, broadly in line with historical levels.

Inui pointed to AI capital spending as a key catalyst, supporting semiconductors and broader AI-linked equities, alongside a resilient macro and consumer backdrop. On sectors, HSBC remains positive on technology, financials and industrials but selective on consumer-related areas.

The strategist played down four common investor worries, including potential Federal Reserve rate hikes, geopolitical uncertainty, the U.S. midterm elections and rising liquidity needs from initial public offerings and hyperscaler funding.

"Our view is that these concerns are overdone," she wrote.

HSBC expects the Fed to stay on hold this year and next, and sees the 10-year Treasury yield at 4.65% by year-end.

On the midterms, Inui said election-driven volatility tends to be temporary, while geopolitical risk has had limited impact on aggregate consumer spending.

“That said, sentiment, and the multiple investors are willing to pay for forward earnings, is less certain. Tech valuations, for instance, remain range-bound despite a strong rise in earnings and record profit margins,” wrote the analyst

"Multiple expansion may be challenging even as fundamentals improve," she added, flagging seasonal September weakness, inflation prints and regulatory pressures on data centers and social media as potential sources of volatility.

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