UBS Global Wealth Management recently released its latest outlook, raising its year-end 2026 target for the S&P 500 from 7,500 points to 7,900 points, while setting a mid-2027 target of 8,200 points. The firm maintains its “attractive” rating on U.S. equities. According to UBS, strong corporate demand for data center infrastructure, coupled with resilient consumer spending, are the main drivers propelling the market upward. The bank has also raised its 2026 earnings per share (EPS) forecast for S&P 500 constituents from $310 to $335.
Strategists specifically noted that the improvement in earnings expectations is highly concentrated: about half of the incremental increase comes from semiconductor demand, particularly rising prices for memory chips; another quarter comes from the energy sector, benefiting from increased energy demand driven by data center construction. In its report, UBS explicitly stated that a resilient economy, earnings growth, a supportive Federal Reserve, and the widespread rollout of artificial intelligence will continue to lift the stock market. Data from LSEG as of May 15 shows that S&P 500 first-quarter earnings grew nearly 29% year-over-year, with AI-related heavyweight stocks contributing the vast majority of the increase.
This marks another major Wall Street bank to raise its S&P 500 target in recent weeks. Previously, Morgan Stanley raised its end-2026 target for the S&P 500 from 7,800 points to 8,000 points, and its chief equity strategist, Mike Wilson, set a mid-2027 target of 8,300 points. Morgan Stanley’s 2026 EPS forecast stands at $339, slightly above UBS’s $335. Wilson stated that the logic for being bullish on the index is based on earnings growth, not valuation expansion. Even if the Federal Reserve keeps interest rates unchanged, historical back-testing shows that in an environment of strong earnings growth, median stock price returns can reach 14%.
HSBC also raised its target in mid-May from 7,500 points to 7,650 points, forecasting 2026 EPS growth of about 20% to $325, with the “Magnificent Seven” remaining the primary contributors to earnings growth. Veteran strategist Ed Yardeni went further, raising his target from 7,700 points to 8,250 points, making him the most aggressive bull among mainstream Wall Street institutions. HSBC also noted that if the rally broadens to more sectors, the index still has further upside potential.
Despite the prevailing optimism, UBS also issued a clear warning in its report: the ongoing uncertainty surrounding the situation in the Strait of Hormuz could erode the core drivers currently supporting the bull market. The bank’s strategists pointed out that recent increases in oil prices and interest rates have already put pressure on some sectors. If the situation remains unresolved for an extended period, continued rises in oil prices would push up inflation expectations, thereby forcing interest rates to remain higher for longer. This would be particularly unfavorable for growth stocks that rely on long-term earnings expectations.
