Key Takeaways
The S&P 500 could surge to 9,000 by the end of 2026 in a bull case scenario outlined by Evercore ISI, which sees an artificial intelligence-driven productivity boom reshaping the economy.
"The Pandemic changed everything. Warlike stimulus, surging M2, and a productivity shock collide with an ’AI Revolution’ – reminiscent of the 1920s and 1990s," Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, said in a note to clients.
Evercore’s base case projects the index will reach 7,750 by 2026, but it assigns a 30 percent chance for the rally to extend to 9,000. Separately, RBC Capital Markets set a 12-month price objective of 7,900, representing about 7.7 percent upside from early May levels.
The forecasts underscore a widening gap in expected corporate performance, with RBC projecting 28 percent earnings growth for AI-centered companies versus just six percent for the rest of the index, highlighting the make-or-break importance of AI strategy for investors.
Emanuel’s optimistic forecast draws parallels to historic economic transformations, arguing that the convergence of post-pandemic stimulus and AI-driven productivity could push annual productivity growth to three percent before the end of the decade. To capitalize on this, the firm recommended long-dated call options on a basket of AI-related stocks and the Invesco QQQ Trust ETF.
Lori Calvasina, head of U.S. equity strategy at RBC Capital, presents a more tempered but still bullish outlook. Her firm’s 7,900 target anticipates periodic “garden-variety” corrections of five to 10 percent but avoids a deeper downturn unless recession fears re-emerge. RBC’s model assumes a stark divergence in earnings, with AI-focused firms growing 28 percent in 2027 compared to just six percent for other index members.
Despite the bullish projections, analysts acknowledge significant risks. Evercore’s Emanuel cautioned that AI models themselves have a "Narrow Consensus" bias, underestimating tail-risk events and placing a premium on specialized industry knowledge over simple AI adoption. RBC identified immediate headwinds including potential earnings revisions from geopolitical conflict, profit-taking in high-flying semiconductor stocks, and uncertainty related to the U.S. midterm elections. Both outlooks are sensitive to inflation and interest rate policy, with RBC estimating that a spike in inflation to 3.8 percent could pull the S&P 500’s fair value down to the 7,400-7,500 range.
This article is for informational purposes only and does not constitute investment advice.
