Raising Our S&P 500 Price Target to 8200

Stocks have enjoyed an amazing run.

The S&P 500 rose 20% from the March 30 low through May 26 - its biggest gain ever in such a short time.

It’s easy to think it’s time to cash out.

We’ll take the other side by raising our S&P 500 price target to 8200.

Let’s rewind the tape. On March 23, we told you High Oil & Surging Volatility Will Not Derail the Stock Market.

We supported that bullish stance with data rich studies.

Then on April 20, we said Earnings Momentum is Accelerating and Will Send Stocks Surging.

Both calls hit the mark.

But we aren’t changing our tune just yet.

Today, we’re outlining a path for the S&P 500 to rally another 9% by yearend.

We’ll tackle popular bearish worries including rising interest rates, momentum, earnings and valuations. Each of which signal due North for stocks.

However, not all stocks are the apple of the market’s eye. The AI infrastructure bottleneck continues to be the market’s biggest winning theme.

We’ll include a 25-stock AI infrastructure basket of outliers with margin protecting pricing power… making them a magnet for huge institutional inflows.

They’re the driving force behind our upgraded market price target.

Before we get to the stocks, let’s stroll down history lane.

Stocks Perform Better After All-time Highs

Markets have made a lot of new highs recently.

The bears love telling you that buying stocks after such a big run is risky.

Let’s fact check that.

It turns out it’s not true. Stock market momentum is a powerful force which is silly to fight.

Here’s the proof.

Since 1989, buying stocks at record highs has produced better returns than buying at all other times combined.

Below plots the average 1, 3, and 5 year returns of the S&P 500, comparing buying stocks on all other days vs. only on days the S&P made all-time highs.

Buying the S&P 500 on any other day averages an 11.9% annual return. But when you buy at an all-time high, the historical return jumps to 13.6%.

On a 3-year basis, investing in the S&P 500 on any random day averages gains of 39%, compared to 46% when buying all-time highs.

Go out 5 years and average gains hit 74% compared to 82% when buying all-time highs:

Don’t fear momentum…embrace it.

Let’s shift gears to the macro outlook.

Rising Interest Rates Won’t Kill Stocks

One major bearish macro narrative these days is: “higher for longer oil prices mean higher inflation and rising interest rates, dooming overpriced stocks.”

We’ve all heard this one plenty lately.

Let’s fact check this.

Bears won’t like this at all.

Since 1989, stocks have actually performed better when rates were rising vs. falling.

Here’s why: Equities typically rise alongside rising bond yields when the market is raising its expectations for the economy.

That’s exactly what’s happening now.

The latest Atlanta Fed GDP NOW forecast calls for impressive 4.3% Q2 real GDP growth as a healthy high-end consumer and the AI infrastructure boom offset the temporary drag from elevated input prices.

This isn’t a 2022 inflation re-run. While input prices remain sticky thanks to the Iran war, stocks always look ahead and costs will ease as geopolitical risk fades.

The bottom line is 10-year Treasury yields are rising for the right reason - strong growth, not spiraling inflation, mitigating their ability to hurt stocks.

The average annual rolling one-year return for the S&P 500 during a falling rate environment was just 6.5%, compared to 13.9% in a rising rate regime (chart).

Rising rates due to a strong economy means it’s time to upgrade the index.

Earnings Growth Will Power the S&P 500 Much Higher

We know stocks follow earnings.

Similar to last year’s tariff tantrum, earnings growth has remained resilient in the face of much higher oil prices.

In the wake of a banner first quarter earnings season, CY 2026 EPS growth has been revised up to 21.5%, which is 3X the long-term average of 7.5%.

The energy, technology and materials sectors are leading the way with 57%, 41% and 39% growth, respectively:

As earnings surge, valuations can become attractive as we break out to new highs.

Here’s how.

Valuations Fall as Earnings Surge More than Price

We hear a lot about “stretched valuations” from the pundits.

Despite the S&P 500’s amazing rip since March 30, valuations are actually down to 21X from 23X as earnings have risen more than stock prices (chart).

As a result, the S&P 500 is trading at a PE to growth (PEG) ratio of only 1X with EPS growth and valuations both at 21. The long-term S&P 500 average PEG ratio is 2X.

Note how the forward PE has contracted as stock prices break new highs:

Wait, the valuation story gets even better.

Big valuation contractions have tended to set the stage for strong equity advances.

The S&P 500 12-month forward PE fell four turns from October through March from 23X to a low of 19X.

On average, since 1977, stocks have gained 9.7% over the next year after top quartile PE contractions like we just experienced:

All that’s left to do is raise our yearend target.

Raising Our S&P 500 Price Target to 8200

The biggest takeaway is to stay long stocks.

Strong price momentum, a better than feared macro backdrop, record earnings and still reasonable valuations mean the S&P 500 still has room to run.

Our fresh 8200 yearend S&P 500 target doesn’t require much PE expansion – its earnings driven.

8200 implies just a 22X multiple on consensus CY 2027 EPS of $371. This is easily achievable in the context of a strong double-digit EPS growth environment.   

Let’s dig deeper for your optimal portfolio allocation.

The AI infrastructure bottleneck continues to be the market’s biggest winning theme.

HALO (heavy asset, low obsolescence) stocks are still in charge, but leadership is shifting from energy as the geopolitical fog clears, towards AI infrastructure plays in the tech, real estate, industrials, materials and utilities sectors.

MoneyFlows sector rankings reflect this trend (chart).

Note huge semiconductor and Mag 7 earnings momentum has helped technology stay on top while staples, discretionary and health care remain weak:

To win big playing winning themes, you need to drill down to individual names.

Not to worry, MoneyFlows was built to find winners.

We first showcased our MoneyFlows AI infrastructure basket of 25 outliers in semiconductors, hyper-scalers, power, optics, and networking on May 5 and the basket is up big since.

Inflows have been constant, powering most of these names to one record high after another.

There’s still plenty of upside left. Under-the-surface of the market is a world of hidden opportunity.

To get access and make even more from this call to action, sign up for a PRO membership.

You’ll get our proprietary indicators and learn how our unique money flow approach finds outlier stocks early. Give it a shot!

If you’re a money manager or RIA and want portfolio solutions and deep ETF insights, reach out about our Advisor solution here.

Be early next time.

Go with the flows!

The AI infrastructure theme is the gift that keeps on giving. This trend spans elite companies levered to the surging AI buildout.

Below, for PRO subscribers, is a sector-diversified list of 25 powerful winning stocks with big money activity.