Jefferies Sees S&P 500 Reaching 7,500 by End-2026 on AI Strength
Jefferies expects the S&P 500 to climb to a fair value of 7,500 by the end of 2026, signaling roughly 9% upside from current levels. The forecast is driven by steady earnings growth, resilient corporate profitability, and continued strength across AI-linked stocks.
In a recent research note, Desh Peramunetilleke, Jefferies’ Head of Quantitative Strategy, said, “We forecast another 9% upside for the S&P 500, with a 2026 target of 7,500.” The strategist attributed this projection to double-digit earnings CAGR and robust profitability in key technology and growth sectors.
Earnings Strength and AI Support Drive Outlook
Jefferies acknowledged lingering concerns about a potential market correction or a possible AI unwinding risk, but emphasized that the current rally is supported by fundamentals rather than speculation.
“After comparing the profitable AI trade to the profitless dot-com bubble, we still see upside despite potential road bumps,” Peramunetilleke wrote.
The firm’s 2026 fair value target is based on projected 2027 earnings per share (EPS) of 340, implying a 13% compound annual growth rate (CAGR) and a 22x forward price-to-earnings (P/E) multiple.
In Jefferies’ bull case, the index could reach 8,100, while the bear case assumes a downside toward 5,400.
Sector Preferences and Market Positioning
Jefferies said it expects a 13% EPS CAGR for 2026–2027, with profit margins likely to stay stable even if top-line growth slows slightly.
The firm currently favors growth-oriented sectors such as communication services, financials, and consumer staples. It remains neutral on technology and industrials, while staying underweight on energy, materials, and consumer discretionary stocks.
Peramunetilleke added that growth stocks remain attractively valued, trading at a 10% discount to their five-year peak relative P/E ratios. “We think the AI trade still has legs when compared to dot-com,” he said, noting that growth stocks tend to perform strongly during up-markets.
Jefferies also reiterated its focus on ‘ROIC stars’, GARP (growth-at-a-reasonable-price) plays, and select thematic opportunities to capitalize on long-term market resilience and innovation trends.
