Wall Street has another bullish target to focus on as stocks regroup for a rare August rally, powered in part by impressive corporate earnings and fading bets for interest-rate hikes.
JPMorgan lifted its end of year price target for the S&P 500 to 8000, a 2.5% increase from its previous estimate, citing both elevated index profits and the impressive gains from the hyperscaler cohort that is "helping validate rising AI capex, strengthen order coverage, and further ease (return on invested capital) concerns."
The bank also projects next year's earnings for the S&P 500 in the region of $420, a tally that's around 2.7% ahead of the current consensus and suggests a 15% growth rate.
The upgrade follows a stunning set of second-quarter earnings figures, which has taken the overall benchmark earnings growth rate past 30% and marks the strongest reporting season in nearly five years.
Wells Fargo data, in fact, indicates an overall beat rate of around 8% for the 430-plus companies which have reported so far, double the long-term average and paced by gains outside of the tech sector.
Stocks have responded, as well, with the S&P 500 posting a 3.6% gain last week, its best since April, to close at a record high of 7757 points. The tech-focused Nasdaq Composite, meanwhile, closed at 26,690 points on Friday, taking its full-year gain to just under 15% and pegging it just 1.5% south of the all-time high it reached on June 2.
More impressive, however, has been the rise in an equal-weighted index of S&P 500 stocks, which has gained more than 7.8% over the past three months.
"Three forces have driven the rally: exceptional earnings, continued AI capital spending and demand, and fading concerns about an imminent Fed rate hike," said Bob Edwards, chief investment officer at Edwards Asset Management.
"The deleveraging cleared excess; earnings gave investors a reason to return," he added, noting the market will likely "sawtooth" its way to an 8080 point finish to the year for the S&P 500.
The bumpy ride for the benchmark, set against modest price targets, suggests a resurgence of broader market volatility into the autumn months that isn't yet visible in traditional investor gauges.
The Cboe Group's VIX index is trading around 15.85 points, near the lowest levels since early January and suggesting daily swings for the S&P 500 of just 77 points over the next month.
A measure of single stock volatility, meanwhile, has eased to the lowest levels since early May and is down more than 22% from its late July peak.
Still, September is likely to introduce new risks with both the Federal Reserve's autumn interest-rate decision, as well as its growth, inflation and unemployment projections for 2027, and the start of the midterm election campaign season that historically has held back stock market gains.
September has also historically been the worst performing month of the year for U.S. stocks, "with all three major indexes posting average losses over the past 3 1/2 decades," according to Jeff Hirsch of the Stock Trader's Almanac.
Big risks tied to the U.S. war in Iran, the sustained surge in global crude prices and the impact of trade disputes, and the return of tariffs to the bargaining table, will also linger over the market's bullish settlement.
But stocks are finally breaking out of their long summer slump, which has held the benchmark to within 250 points of the 7500 level it first crossed in mid-May. And they're also approaching the four year anniversary of the long bull rally, which began in October of 2022 and has added more than 116% to the S&P 500.
"A meltup from here would more likely be earnings-led rather than valuation-led," said Ed Yardeni, founder and president of Yardeni Research. "Bull markets do not die of old age or of accumulated gains. They usually die when earnings roll over."