JPMorgan expects the S&P 500 to reach 7,500 points by 2026, with the potential to surpass 8,000 if the Federal Reserve continues cutting interest rates.
In a note to clients, the bank explained that current high valuations reflect strong expectations for earnings growth, rising investments in artificial intelligence, increased shareholder payouts, and potential fiscal easing supported by government policies.
The bank added that productivity gains driven by AI and the easing of certain regulations remain undervalued, despite their significant role in supporting future earnings.
JPMorgan’s projection for the index to reach 7,500 points is based on an anticipated 13% to 15% increase in corporate earnings over the next two years. Companies within the S&P 500 posted a 13.4% year-over-year earnings increase in the third quarter, according to FactSet data.
The bank also expects the Federal Reserve to implement two additional rate cuts before pausing, at a time when markets already see a strong likelihood of another cut next month.
According to JPMorgan, further improvement in inflation trends could pave the way for additional rate reductions—potentially pushing the benchmark index above the 8,000-point mark.
JPMorgan is the second major Wall Street bank this week to set such a target for 2026, following similar forecasts issued by HSBC. The S&P 500 closed Tuesday’s session at 6,765 points.
Banks note that the U.S. economy is increasingly taking on a “K-shaped” pattern, with a widening gap between high- and low-income consumers, reshaping spending habits and overall consumer sentiment.
Recent corporate earnings reports show that lower-income households continue to face pressure, while higher-income consumers—often more engaged with the stock market—continue to spend freely.
For equity investors, JPMorgan believes this divergence may keep market sentiment fragile, especially in an economy that lacks balance despite strong performance expected from large companies benefiting from the growing adoption of AI technologies.
The bank emphasized that companies and governments worldwide are racing to invest in artificial intelligence, seeking productivity gains and attempting to avoid falling behind competitors.
According to the note, AI momentum is spreading across a wide range of sectors—technology, utilities, banking, healthcare, and logistics—creating both winners and losers along the way.
However, the bank warns that this transformation may deepen existing economic polarization, and that the “wall of worry” surrounding AI is likely to remain in place for years to come.
