BofA says long-term bull case intact as it ups 2026 S&P 500 forecast

BofA on Monday raised its year-end 2026 forecast on the S&P 500 to 7,400 from 7,100 and launched a 12-month forecast of 7,800.

The new target is still below the benchmark index's current level of 7,635 on Monday, and in a note, Savita Subramanian, equity & quant strategist at BofA Securities, writes that "we are entering a seasonally weak period and in our view are overdue for a pullback."

Among risks are higher inflation, potential Federal Reserve rate hikes, deteriorating earnings per share quality and credit cycles that have started to slow.

But she notes the "long-term bull case is intact," and that there are lots of U.S. equities to buy.

"Productivity remains the long-term bull case for the S&P 500," she says, "as companies swap risky, non-scalable people for processes."

She adds: "The consumer is okay, as are jobs..."

In addition, there is still strong growth ahead in earnings.

"We forecast S&P 500 EPS growth of 33% in 2026 and 12% in 2027... with growth outpacing what macroeconomic forecasts would suggest, supported by AI capex, manufacturing and productivity," she writes, noting though that "index earnings increasingly rely on an AI buildout, where it is a complex, interconnected and rapidly evolving ecosystem."

As for the U.S. midterm elections this November, worries that a "blue sweep would gum up capex" are not relevant, she adds.