Jefferies Forecasts S&P 500 to Reach 9,000 by End of 2027 on Earnings Strength

Jefferies has reiterated a bullish outlook on the S&P 500, forecasting the benchmark index could reach 9,000 by the end of 2027. The investment bank argues that robust corporate earnings growth, fueled by artificial intelligence, can overcome headwinds from inflation and elevated bond yields.

Earnings Growth Fuels Optimism

Jefferies set a year-end 2026 target of 8,000 for the S&P 500, underpinned by a forecast of 35% earnings growth and $373 in earnings per share (EPS). This projection is more optimistic than the consensus expectation for 29% growth. For 2027, the firm anticipates the index will climb to 9,000, supported by $450 in EPS and 20.8% earnings growth.

The report highlights that the earnings outlook has improved significantly, with 2026 consensus growth estimates rising from approximately 13% at the start of the year to 29%. This strength is also broadening beyond mega-cap technology stocks, with earnings for the rest of the S&P 500 now expected to grow by about 24% in 2026.

AI and Valuation Context

Artificial intelligence remains a central theme in the firm's analysis. Jefferies estimates that companies with AI exposure now account for about 46% of the S&P 500, with their earnings projected to grow by 60% in 2026. While this growth is expected to moderate to 24% in 2027, Jefferies sees continued double-digit growth for both AI-related firms and the broader market.

Despite an elevated market valuation, with the S&P 500 trading at roughly 21.5 times forward earnings, the bank believes the multiple is increasingly justified by the strong earnings outlook. Notably, its 2027 target is based on a lower multiple of 20 times earnings, suggesting the forecast does not depend on further valuation expansion.

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Risks and Sector Views

Higher Treasury yields remain a primary risk to the forecast. Jefferies noted that a rise of more than 100 basis points in the 10-year Treasury yield over 12 months has historically led to a contraction in equity multiples. The firm also anticipates market leadership will broaden, with only 36% of S&P 500 stocks currently outperforming the index, below the long-term average of 47%.

In its report, Jefferies outlined its sector preferences:

• Overweight: Technology, Financials, Health Care, and Materials.
• Cautious: Communication Services, Consumer Discretionary, and Real Estate, citing weaker earnings trends or sensitivity to higher rates.

Jefferies' scenarios for 2027 range from a bear case of 6,900 to a bull case of 10,500. The primary downside risk, according to the firm, would be a significant deterioration in earnings expectations, particularly among AI-related companies.