HSBC lifts S&P 500 year-end target

In a Tuesday client note, HSBC raised its year-end 2026 S&P 500 target to 8,100 from 7,650, attributing the revision to corporate earnings that have surpassed expectations.

Strategist Nicole Inui noted the upgrade was chiefly earnings-driven, with first-half 2026 EPS growth approaching 40% and a pace above 25% anticipated for the second half.

HSBC projects 2026 full-year earnings growth of 33%, or $360 per share, while applying a 22.5x price-to-earnings multiple that aligns broadly with historical norms.

Inui identified AI capital expenditure as a central driver underpinning semiconductor and broader AI-linked stocks, supported by a resilient macroeconomic and consumer environment. By sector, HSBC maintains an upbeat stance on technology, financials, and industrials while taking a selective approach to consumer-related segments.

She also pushed back on four recurring investor concerns: possible Fed rate increases, geopolitical instability, the U.S. midterm elections, and growing liquidity demands from IPOs and hyperscaler financing.

"These worries are overdone in our view," Inui wrote.

HSBC expects the Federal Reserve to remain on hold this year and next, and forecasts the 10-year Treasury yield at 4.65% by year-end.

On the midterms, Inui argued that electoral cycles usually cause only temporary volatility, and geopolitical risks have had little effect on overall consumer spending.

"Having said that, sentiment—and the multiple investors will pay for forward earnings—is more uncertain. Tech valuations, for example, are still range-bound even as earnings climb strongly and profit margins reach records," Inui stated.

She added that "multiple expansion may prove difficult despite improving fundamentals," while highlighting potential volatility from seasonal September softness, inflation data, and regulatory pressure on data centers and social media.