Citi Raises Year-End S&P 500 Forecast
The bank now anticipates the S&P 500 could reach 6,900 points by mid-2026, about 8% higher than the projected 2025 level.
Quick overview
- Citigroup strategists have raised their year-end target for the S&P 500 to 6,600 points, citing tax cuts as a counter to tariff impacts.
- The bank's optimism is bolstered by a strong earnings season, with over 81% of companies exceeding analyst expectations.
- Despite concerns over stock valuations, equities are supported by expectations of fiscal stimulus and Federal Reserve rate cuts.
- Citi anticipates that the 'Magnificent Seven' tech stocks will lead the market, while advising caution regarding macroeconomic factors.
Citigroup strategists, led by Scott Chronert, have raised their year-end target for the S&P 500, citing expectations that tax cuts will offset the negative impact of tariffs on U.S. equities.
Their new forecast calls for the index to reach 6,600 points by year-end, up from a previous estimate of 6,300.
The optimism is supported by a stronger-than-expected earnings season: more than 81% of companies in the index beat analyst estimates, and there have been few signs that tariffs are significantly hurting profits.
Citi also raised its earnings-per-share projections for 2025 to $272 (from $261) and for 2026 to $308 (from $295). The bank now anticipates the S&P 500 could reach 6,900 points by mid-2026, about 8% higher than the projected 2025 level.
However, the market faces mixed signals. A Bank of America survey found that a record 91% of fund managers believe U.S. stocks are overvalued after the rally since April. While global equity exposure has reached its highest point since February, 16% of investors still maintain an underweight position in U.S. equities.
Even so, equities have found support from expectations of fiscal stimulus and Federal Reserve rate cuts, with gains heavily concentrated in large-cap tech stocks. Nvidia, Microsoft, Meta, Broadcom, and Palantir account for 68% of the S&P 500’s total gains so far this year.
Focus on Tech Earnings
While most mega-cap companies have already reported, the market is awaiting Nvidia’s earnings release on August 27 with particular interest.
Citi expects the “Magnificent Seven” group—driven by artificial intelligence—to retain its leadership, but believes gains will broaden to other sectors, following last year’s pattern. Still, the bank advises investors to keep a close eye on macroeconomic and cyclical factors that could influence equity performance.
“The set of policy-related distortions from the first half is gradually being priced into earnings expectations,” Chronert and his team wrote. “The S&P 500’s upward trajectory will require sustained growth leadership from large-cap companies, along with continued sector-wide expansion to drive price action,” they added.
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