Barclays has raised its year-end 2026 S&P 500 target to 7,800 from 7,650, citing a stronger earnings outlook for U.S. companies despite growing concerns over inflation, interest rates, and artificial intelligence spending.
The updated Barclays S&P 500 forecast comes as the benchmark index navigates a mixed macroeconomic environment.
While the bank remains constructive on equities, it warned that earnings growth and AI-related investments will need to do more of the heavy lifting as expectations for Federal Reserve rate cuts fade.
“The equity bull case remains intact, but earnings and AI capex visibility must do more of the work as Fed support fades and positioning is less able to absorb disappointment,” the bank said.
The higher S&P 500 price target follows Barclays’ decision to raise its 2026 earnings-per-share (EPS) estimate for the index to $337 from $321.
The new forecast remains slightly below Wall Street’s consensus estimate of $341 but implies annual earnings growth of about 21% from the bank’s projected 2025 EPS of $279.
Barclays attributed the target increase to stronger-than-expected first-quarter earnings, ongoing reflationary trends supporting revenue growth, and resilient industrial activity.
The bank also introduced a 2027 EPS forecast of $389, slightly below the Street consensus of $398.
Barclays trims valuations
Despite raising its S&P 500 target, Barclays trimmed its valuation assumptions, lowering its baseline earnings multiple for large technology companies to 26x from 27.5x due to uncertainty surrounding AI infrastructure spending and monetization.
The bank expects hyperscaler capital expenditures to exceed $1.1 trillion by 2028, about 26% above current Street estimates, while warning that spending could increasingly outpace internally generated cash flow.
Barclays added that the equity bull market remains intact, though fading expectations for Federal Reserve support could leave stocks more vulnerable to disappointments.
At the same time, Barclays also flagged several risks for the second half of the year, including renewed inflation, a more restrictive Federal Reserve policy path, and slowing consumer spending.
While recession risks remain limited thanks to a resilient labor market, strong economic data could delay future interest-rate cuts.
On the sector front, Barclays downgraded Financials to ‘Neutral’, citing concerns over private credit, regulation, and AI disruption. Healthcare was upgraded to ‘Neutral’ as earnings revisions appear largely complete.
The bank maintained Positive ratings on TMT, Industrials, and Utilities while remaining Negative on Consumer sectors due to inflationary pressures and moderating income growth.
