Jefferies has released a research report expressing a bullish stance on the S&P 500, setting a year-end 2026 price target of 8,000 points, underpinned by a projected 21% earnings per share growth. The firm also forecasts a target of 9,000 points by the end of 2027, a level more than double the historical average.

The investment bank's optimistic equity outlook is driven by a robust earnings narrative, which it believes remains undervalued by the market and will be realized through upward estimate revisions. While oil prices, inflation, and rising 10-year Treasury yields could compress valuation multiples, these factors should not offset the compelling earnings story.

Jefferies points to sustained, stronger-than-expected earnings growth and artificial intelligence-driven investment as key supports. Its 8,000 target for the S&P 500 in 2026 is based on $373 in earnings per share and a 21.5x multiple, while the 2027 base case assumes $450 in EPS, corresponding to the 9,000 target with a 20x multiple. The primary risk would be a meaningful slowdown in earnings, particularly among AI-related companies, which remain the market's main growth engine.

The firm believes earnings expectations are still underappreciated by the market. Following a strong second-quarter earnings season and positive management commentary, it sees room for further upward revisions through 2028. Although the pace of revisions may decelerate, the bank does not expect earnings expectations to more than double from the start of the year as they did heading into 2026.

Jefferies notes that while the earnings story remains centered on AI, it is no longer exclusively a Magnificent 7 narrative. The market currently anticipates 29% earnings growth for the S&P 500 in 2026, a substantial increase from approximately 13% at the beginning of the year. Although the Magnificent 7 are still expected to deliver 45% earnings growth, expectations for the rest of the S&P 500 have also improved materially, with growth forecasts rising to around 24%. The firm estimates that approximately 46% of the index has direct or indirect exposure to AI and data center spending, with these companies expected to grow earnings by 60% this year before decelerating to 24% by 2027.