Investment bank Jefferies has revised its year-end target for the S&P 500, signaling a more optimistic tone compared to its cautious outlook three months ago.
In a Monday investor note, the banking giant projected the benchmark index would end the year at 5,600. This target suggests an 11% decline from the current value of 6,335.
The new forecast implies a 20x price-to-earnings (P/E) multiple, reflecting growing confidence in market resilience despite near-term challenges.
Desh Peramunetilleke, Jefferies’ head of quantitative strategy, cited easing earnings downgrades and potential improvements in free cash flow, supported by fiscal policy initiatives, including former President Donald Trump’s now-passed “One big, beautiful bill.”
Despite the raised target, Peramunetilleke expressed caution about the months ahead, noting that August and September have historically been weak for equities since the 2008 financial crisis. He also pointed to rising core CPI and unemployment rates, along with a tendency for GDP estimates to be revised downward during this period.
Peramunetilleke acknowledged that valuations remain “rich,” particularly with earnings per share (EPS) growth projected at just 5% for 2025, a figure well below the 11% consensus earlier this year.
Investment strategy
In terms of sector strategy, he maintained a defensive stance, recommending communication services and utilities, while remaining neutral on technology, financials, industrials, and healthcare. He remains underweight in the energy, consumer discretionary, and materials sectors.
Back in April 2025, Jefferies had slashed its S&P 500 forecast to 5,300, down from an earlier estimate of 6,000. That downgrade was driven by a weakening earnings outlook and an increased risk premium, reflecting a 19 times P/E multiple at the time.
Notably, in April, much of Wall Street had turned bearish on the economy amid uncertainty from trade tariffs, which were feared to trigger a recession. However, with the U.S. securing several new trade agreements, many firms have revised their economic outlook to a more bullish stance, though opinions on the S&P 500’s trajectory remain sharply divided.
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