HSBC: S&P 500 can rally to 7,000, a 20% surge, by year-end
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The S&P 500 will easily hit 7,000 by year-end, says Max Kettner, chief multi-asset strategist at HSBC. That would put the market up nearly 20% on the year.
Why it matters: Kettner joins strategists at JPMorgan and elsewhere on Wall Street who don't see this bull market rally ending anytime soon.
What they're saying: This market can glide another 5% to 7,000 "easy," Kettner says, adding that it's unclear why some other strategists continue warning about near-term volatility when the path upward is "clear."
- His call is rooted in a belief that earnings growth will continue to outpace earnings estimates.
- Earnings expectations have remained relatively muted, leaving more room for upside surprises in results.
- Another 13% rally in 2026 would take the S&P 500 from 7,000 to 8,000, which is easily achievable with single-digit earnings growth, he contends.
Between the lines: Kettner is not only bullish, he's also not worried about the downside risks keeping other strategists up at night. That includes the economy's K-shaped recovery that has enabled the top 10% of earners to account for nearly half of consumer spending.
- "The K-shaped U.S. economic recovery isn't something we view as a risk," Kettner wrote in a recent note to clients. "It's something that makes us even more bullish."
- As the wealthy keep spending and propping up stocks, the Federal Reserve is cutting interest rates to support the labor market — and low-income consumers.
- Both of these things occurring at once is the ideal scenario for stock investors.
Yes, but: Kettner notes that the wide gap in consumer health could be a risk in the next several decades, but it's not something that's concerning him over the next 12 months.
Threat level: The biggest risks to this bull market are exhaustion of the AI theme, a spike in hiring that results in accelerated spending and a surge in bond yields, according to a recent note from JPMorgan.
- An AI bubble is not a problem that's arriving at Wall Street's doorstep anytime soon, Kettner says, noting that investors often lose out on unrealized gains by exiting too early.
One fun thing: "People say, 'Oh, yeah, but equities can't go up forever,'" he says. "That's literally what they do. Literally what they've done in the last 150 years."
- OK, he's right. The market has recovered 100% of the time.
- But investors would be wise to remember that those recoveries can take time, even possibly a decade or more, to take shape.
