HSBC raised its year-end 2026 target for the S&P 500 to 8,100 from 7,650, citing corporate earnings that have exceeded its previous expectations.
Strategist Nicole Inui said the revision was driven mainly by earnings. First-half 2026 earnings-per-share growth was close to 40%, while HSBC expects growth of more than 25% during the second half.
The bank forecasts full-year 2026 earnings growth of 33%, equivalent to earnings per share of $360. HSBC applies a price-to-earnings multiple of 22.5 times, which it said is broadly consistent with historical levels.
AI Spending and Macro Conditions Support HSBC Outlook
Inui identified capital spending related to artificial intelligence as one factor supporting semiconductor companies and other AI-linked equities.
She also cited the macroeconomic and consumer environment as part of HSBC’s outlook.
At the sector level, HSBC remains positive on technology, financials and industrials, while taking a selective approach to consumer-related sectors.
The strategist also addressed four areas of concern among investors: potential Federal Reserve rate increases, geopolitical uncertainty, the U.S. midterm elections and higher liquidity requirements associated with initial public offerings and hyperscaler financing.
“Our view is that these concerns are overdone,” Inui wrote.
HSBC Expects Fed to Keep Rates Unchanged
HSBC expects the Federal Reserve to leave interest rates unchanged through this year and next. The bank forecasts the 10-year U.S. Treasury yield at 4.65% by the end of 2026.
On the U.S. midterm elections, Inui said election-related volatility has historically tended to be temporary. She also said geopolitical risks have had a limited effect on aggregate consumer spending.
However, the strategist said the outlook for market sentiment and valuation multiples is less certain.
“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.
Inui identified seasonal weakness in September, inflation data and regulatory pressures affecting data centres and social media companies as potential sources of market volatility.