The extreme value of 8,500 points appeared! Two top strategists are looking higher than the S&P 500 target, and strong profits are the core support

The Zhitong Finance App notes that market observers may have different opinions on how interest rates affect the S&P 500 index, but their level of optimism about the direction of the stock market is higher than before.

Bank of America's Savita Subramanian is one of the top bearers on the stock market. She raised her target point for the benchmark index — previously the lowest target on Wall Street, while reminding that the index is still vulnerable to interest rate risks. With the S&P 500 rising by more than 11% this year, Tallbacken Capital Advisors CEO and founder Michael Purvis doesn't think rising interest rates will end this round of gains.

Subramanian is the head of US equities and quantitative strategy at Bank of America. She raised her year-end forecast from 7,100 points to 7,400 points, which means it will fall 2.9% from the closing price of the S&P 500 index on Monday. Her forecast remains one of Wall Street's most pessimistic predictions, according to a survey of more than 20 strategists.

She expects the S&P 500 to hit 7,800 points in the next 12 months, up only 2.4% from the latest closing price.

Tallbacken's Purvis raised its year-end target point from 7,400 points to 8,500 points to reflect “unusually strong” profit growth. The new target surpassed the highest Wall Street forecast currently held by Yardeni Research President and Chief Investment Strategist Ed Yardney, and predicted that the S&P 500 index would rise about 12% from Monday's closing price.

Raise the target point

The US stock market fell on Monday as leaders of major artificial intelligence companies called for a slowdown in development, clashing with the Trump administration and Wall Street. The 10-year US Treasury yield once rose above 5%, for the first time since 2023, due to market concerns that high oil prices, inflation, and the resulting rise in borrowing costs will impact the US economy.

Investors are currently awaiting the Federal Reserve's interest rate decision on Wednesday. Most interest rate swap traders have factored in their expectations of a 25 basis point rate hike.

Profit growth

Subramanian remains cautious about the risk of inflation and the Fed's interest rate hike, and pointed out that any catalyst that pushes financing costs to rise further from tight levels could “accelerate the arrival of pain.”

She also said that a correction in the stock market was “long overdue”.

Subramanian said this is because there was only one 5% correction in 2026, which occurred in March, and usually three times a year. She added that 50% of the bear market signals she had set had already been triggered.

According to Purvis, this round of stock market gains is “firmly rooted”. He also refuted concerns that changes in interest rates would cause earnings to decline, saying that the correlation between the two is extremely low.

At the end of the day, earnings growth was “unusually strong, sustainable, and wide-ranging,” Purvis said. Coupled with the moderate expansion of the price-earnings ratio, the S&P 500 can easily rise to the 8,500 point area, and possibly even higher.”

Subramanian is equally optimistic about earnings growth. In addition to seeing productivity as a long-term bullish reason for the S&P 500 index, she also stated that profit was “not an issue”. She expects earnings per share to grow 33% in 2026 and 12% in 2027. “Supported by AI capital expenditure, manufacturing, and productivity, the growth rate will exceed the level implied by macroeconomic forecasts”.

She wasn't too worried about the risk that the Democratic Party might win big in this year's midterm elections, thus challenging AI spending, and pointed out that the relevant construction was more driven by the state government of Red State (the state governed by the Republican Party).

Prior to this target point adjustment, other Wall Street agencies had already raised their forecasts one after another. J.P. Morgan's team of strategists led by Dubravco Lacos-Buias raised the S&P 500 target to 8,000 points in August, and Adney raised his target to 8,400 points shortly thereafter.