Extreme level of 8,500 emerges! Two top strategists raise S&P 500 target as strong earnings become key support

Zhitong Finance APP has noted that while market observers may differ on how interest rates impact the S&P 500 Index, their optimism about the direction of the stock market has increased compared to before.

Savita Subramanian of Bank of America, one of the leading stock market bears, has raised her target for the benchmark index—previously the lowest on Wall Street—while cautioning that the index remains vulnerable to interest rate risks. Despite the S&P 500 having already risen more than 11% this year, Michael Purves, CEO and founder of Tallbacken Capital Advisors, does not believe that rising interest rates will put an end to this rally.

Subramanian, who is Head of U.S. Equity and Quantitative Strategy at Bank of America, raised her year-end forecast from 7,100 points to 7,400 points, implying a 2.9% drop from the S&P 500's closing price on Monday. According to a survey of more than 20 strategists, her forecast is still among the most bearish on Wall Street.

She expects the S&P 500 Index to reach 7,800 points in the next 12 months, which is only a 2.4% increase from the latest closing price.

Purves of Tallbacken raised his year-end target from 7,400 to 8,500 points to reflect "exceptionally strong" earnings growth. The new target surpasses the current highest Wall Street forecast held by Ed Yardeni, President and Chief Investment Strategist at Yardeni Research, and suggests the S&P 500 would rise by about 12% from Monday’s closing price.

Raised Target Points

The U.S. stock market fell on Monday as leaders of major artificial intelligence companies called for a slowdown in development, clashing with the Trump administration and Wall Street. The yield on 10-year U.S. Treasury notes briefly surpassed 5%, the first time since 2023, as the market grew concerned that rising oil prices, inflation, and the resulting increase in borrowing costs would impact the U.S. economy.

Investors are now awaiting the Federal Reserve’s interest rate decision on Wednesday, with interest rate swap traders having mostly priced in a 25-basis-point increase.

Earnings Growth

Subramanian remains cautious about inflation risks and Federal Reserve rate hikes, pointing out that any catalyst driving financing costs even higher from already tight levels could "accelerate the arrival of pain."

She also said that a market correction is "long overdue."

Subramanian noted that there has only been one 5% correction in 2026, which occurred in March, whereas typically there should be three each year. She added that 50% of the bear market signals she tracks have already been triggered.

In Purves's view, this stock market rally has a "solid foundation." He also refuted concerns that interest rate fluctuations would lead to an earnings decline, saying the correlation between the two is very low.

Purves said that ultimately, earnings growth is "exceptionally strong, sustainable, and broad-based." "Combined with a modest expansion in the price-earnings ratio, the S&P 500 could easily rise to the 8,500-point range or even higher."

Subramanian is also optimistic about earnings growth. In addition to viewing productivity as a long-term bullish factor for the S&P 500, she stated that earnings are "not an issue." She expects earnings per share to rise by 33% in 2026 and by 12% in 2027. "Supported by AI capital spending, manufacturing, and productivity, the growth rate will exceed levels implied by macroeconomic forecasts."

She is also not particularly concerned about the risk that a Democratic landslide in this year’s midterms could challenge AI spending, pointing out that much of the related buildout is being driven by state governments in red (Republican-governed) states.

Before the latest target adjustments, other Wall Street institutions had already raised their forecasts. In August, a strategy team led by Dubravko Lakos-Bujas at JPMorgan raised the S&P 500 target to 8,000 points, and Yardeni soon after raised his own target to 8,400 points.