HSBC increased its year-end 2026 S&P 500 target by 450 points to 8,100, with strategist Nicole Inui attributing the revision primarily to the outlook for corporate earnings.
Earnings per share grew by close to 40% during the first half of 2026, according to the bank, and HSBC expects growth to remain above 25% during the second half.
For the full year, the bank forecasts earnings growth of 33% and S&P 500 earnings per share of $360. Its target incorporates a price-to-earnings multiple of 22.5 times, which HSBC described as broadly in line with historical levels.
HSBC Highlights AI Investment and Sector Positioning
Capital expenditure associated with artificial intelligence remains one of the factors in HSBC’s market outlook, with Inui pointing to its impact on semiconductor companies and other AI-related equities.
The strategist also cited the broader macroeconomic environment and consumer conditions.
HSBC continues to hold a positive view on technology, financials and industrials. The bank remains more selective in consumer-related sectors.
Inui said investors have focused on several potential risks, including future Federal Reserve rate increases, geopolitical developments, the U.S. midterm elections and liquidity requirements related to IPO activity and hyperscaler financing.
“Our view is that these concerns are overdone,” she wrote.
Valuation Multiples Remain an Area of Uncertainty
HSBC expects the Federal Reserve to keep interest rates unchanged through 2026 and 2027 and forecasts the 10-year Treasury yield at 4.65% by the end of this year.
Inui said volatility associated with U.S. midterm elections has generally been temporary, while geopolitical developments have had a limited effect on overall consumer spending.
She nevertheless distinguished between the earnings outlook and the valuation investors may be willing to assign to those earnings.
“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.
HSBC identified September seasonality, inflation releases and regulatory developments affecting data centres and social media as factors that could contribute to market volatility.
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