Key insights
- Barclays raised its 2026 S&P 500 target to 7,650, citing strong earnings growth in the tech sector and resilient economic growth. They upgraded industrials and raised materials and energy to neutral. Risks include Middle East tensions, high oil prices potentially forcing the Fed into a difficult position, and stress in private credit markets. The brokerage forecasts robust earnings per share growth, but acknowledges a bumpy road ahead.
March 24 (Reuters) - Barclays raised its 2026 year-end S&P 500 target on Tuesday, betting that strong corporate earnings led by the technology sector and resilient economic growth will outweigh rising macro risks, including war in the Middle East, AI-driven disruption and stress emerging in private credit markets.
The British brokerage lifted its index target to 7,650 from 7,400, implying about 16.2% upside from Monday’s close at 6,581.00.
Since the Iran war started, the S&P 500 has fallen about 4.3%, as soaring oil prices and geopolitical uncertainty pressured risk assets and prompted investors to pull back from equities towards safe-haven assets.
"We believe the U.S. continues to offer stronger nominal growth than other major economies and a secular growth engine in technology that shows few signs of stopping," Barclays strategists said in a note.
"We are incrementally bullish on US equities, though the road likely stays bumpy until we turn a corner."
Barclays lifted its S&P 500 earnings per share estimate for 2026 to $321 from $305, saying the forecast reflects a robust earnings base rather than a valuation re-rating.
Surging oil prices have revived inflation concerns and clouded the outlook for the U.S. Federal Reserve, which last week signaled only one rate cut for 2026.
The brokerage outlined a bear-case scenario of 5,900 for the index, warning that sustained higher oil prices could feed through to inflation and force the U.S. Federal Reserve into an "unenviable corner."
It also flagged rising redemption pressure in private credit funds as a risk that could trigger a sharper downturn if sentiment deteriorates.
Barclays also updated its U.S. sector calls, upgrading industrials to "positive" from "neutral" and raising materials and energy to "neutral" from "negative," citing improving industrial momentum, AI-linked capital expenditure support and benefits from higher energy prices.