Citi Strategists Raise S&P 500 Target On Resilient Earnings

Strategists at Citigroup Inc. raised their target for the S&P 500 Index, saying tax cuts should offset the negative impact from tariffs on US companies.

The team led by Scott Chronert increased its year-end target for the equity index to 6,600 points from 6,300, suggesting gains of about 3% from Friday’s close.  

A better-than-expected earnings season, with little evidence of the harmful impact of tariffs on results, has spurred stocks to fresh records this month. Over 81% of S&P 500 companies have beaten estimates, according to Bloomberg Intelligence, the highest in seven quarters. 

Companies have produced “an impressive beat,” while also mostly sticking with their projections for the second-half of the year, the Citi team said. As a result, consensus views on earnings per share are moving higher. 

The Citi strategists raised their EPS estimates for S&P 500 members for 2025 to $272 from $261 previously, and for 2026 to $308 from $295. The higher profit forecasts trigger no material changes to valuation assumptions, they wrote. They see the index rising to 6,900 by mid-2026, an advance of some 8% from here.

Meanwhile, a record share of fund managers see US stocks as too expensive after the sharp rally since April lows, according to a monthly survey by Bank of America Corp. About 91% of participants indicated that American stocks are overvalued, the highest ever proportion in data going back to 2001. 

While investor allocation to global equities climbed to the highest since February, a net 16% were still underweight the US, the BofA poll showed.

Investors are wagering that tax breaks and Federal Reserve interest-rate cuts will buoy equities. They have largely chased gains through megacap technology shares, pushing the concentration of returns in the S&P 500 to extreme levels. Just five stocks account for 68% of the benchmark’s gains this year: Nvidia Corp., Microsoft Corp., Meta Platforms Inc., Broadcom Inc. and Palantir Technologies Inc.

While most megacaps have already reported, the next big test for the season will be Nvidia’s earnings on Aug. 27.

The Citi strategists noted that the artificial intelligence-influenced/Magnificent 7 cohort continues to demonstrate impressive earnings visibility, but expect the rally to broaden out, similar to market developments last year. That said, they recommend investors “keep an eye” on cyclical and macro-economic drivers. 

“The bevy of the first-half policy-related distortions are gradually being priced into earnings expectations,” Chronert and his team said. “The path higher for the S&P 500 will require the mega cap growth leadership to hold, with continued broadening across sectors to augment the price action.”