Wall Street Sees S&P 500 Reaching 9,275 by Next September

Wall Street analysts project the S&P 500 will reach 9,275 by next September, representing a 19% gain from current levels. FactSet published this bottom-up price target, which aggregates the median analyst price target for every company in the index. The S&P 500 reached an all-time high for the 28th time this year on Oct. 6, with the broader bull market now nearly four years old.

During this period, the S&P 500 has climbed 117%, while the Nasdaq Composite is up 163%. The higher concentration of artificial intelligence stocks in the Nasdaq has driven its stronger performance. Although some investors worry that stocks have become expensive and the bull market is aging, analysts maintain that significant upside remains.

The projected 19% gain exceeds the S&P 500's historical average annualized compound total return of around 10%. However, the index rarely produces returns in line with long-run averages in a straight line. In years when the S&P 500 posted a positive return, the average return was around 21%, aligning closely with current analyst price targets.

Optimistic expectations are built into these targets, primarily regarding earnings growth. At the start of the year, analysts expected compound earnings growth over the next five years of around 18%. This was already high compared to the 13% average earnings growth over the last decade. Currently, analysts expect index constituents to deliver aggregate earnings growth of over 27% per year over the next five years.

Big tech stocks dominate this outlook. Analysts expect the information technology sector to grow earnings by 41.3% in 2027. This estimate has risen from 32.2% in June and 24.6% in March. These rising expectations have pushed the biggest technology companies to account for a larger portion of the S&P 500 in recent months. As of this writing, the top three companies in the index account for 21% of its value.

This concentration creates potential variance between actual index results and analyst outlooks. The bottom-up price target reflects optimism that AI winners will continue producing strong revenue and earnings growth well into next year. These are among the highest long-term expectations for the index in history, leaving room for downside error if growth slows.

Investors who analyze individual company earnings, return on invested capital, and cash flows may find opportunities in other sectors. While analysts have raised expectations for tech stock earnings, they have tempered them elsewhere. For index investors, an equal-weight S&P 500 index may be worth considering if tech underperforms and other sectors broaden out. Alternatively, a simple S&P 500 index fund remains a consistent strategy for matching benchmark returns over the long run.