Barclays has lifted its year-end target for the S&P 500 to 7,800 from 7,650 and unveiled an initial 2027 forecast of 8,800, citing stronger earnings expectations despite a market environment marked by persistent uncertainty.
The bank acknowledged that investors continue to face several challenges. “Equities remain choppy as peace talks stop and start, and questions linger around AI spend, funding and monetization, higher for longer rates, and consumer strength,” strategists led by Venu Krishna wrote.
Barclays believes the broader backdrop remains supportive for equities. Labour market conditions remain healthy enough to keep recession fears contained, although that strength could also postpone future interest-rate cuts. Rising input costs are another factor to monitor, but analysts said they are not yet severe enough to disrupt economic growth.
As a result, “the balance of risks still leans constructive.”
The bank increased its 2026 S&P 500 earnings-per-share forecast to $337 from $321, implying approximately 21% growth from its estimated $279 in 2025. While still slightly below the consensus forecast of $341, Barclays said the revision reflects stronger first-quarter results, ongoing support from reflationary trends and continued industrial resilience.
Barclays also introduced a preliminary 2027 EPS estimate of $389.
The stronger earnings outlook drove the higher index target, although the bank slightly reduced valuation assumptions. It now assigns a 26x earnings multiple to major technology stocks, down from 27.5x previously, reflecting uncertainty surrounding AI investment levels, financing needs and future monetization.
For the broader market, Barclays applies a blended valuation multiple of 23x projected 2026 earnings.
“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 strategists wrote.
Among the key risks for the second half are renewed inflationary pressures, a more restrictive Federal Reserve path and signs that consumer spending could weaken.
Barclays remains optimistic about AI-related investment, forecasting hyperscaler capital expenditures will exceed $1.1 trillion by 2028. However, analysts warned that “a growing mismatch between internally generated cash flow and projected capital requirements” could become a concern.
On sector allocation, the bank downgraded Financials to Neutral, while upgrading Healthcare to Neutral. It continues to favour TMT, Industrials and Utilities, while maintaining a Negative stance on Consumer stocks, where it expects higher inflation and slower income growth to create “lagged pressure in 2H.”
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