'The last pessimist' JPMorgan has also turned around…"S&P 500, bullish next year"

U.S. Wall Street investment banks (IBs) are repeatedly expressing optimism about the U.S. stock market. Even JPMorgan, which had been the last among major investment banks to maintain a cautious stance, predicted a rally in next year's S&P 500 index based on AI-based investment expansion and the U.S. central bank (Fed)'s accommodative monetary policy.

Dubravko Lakos-Bujas, a JPMorgan analyst, said in a report on next year's investment strategy released on the 26th (local time) that the S&P 500 index is expected to reach the 7,500-point range by the end of 2026. This means there is about a 10% upside potential compared with that day's closing price (6812.61 points).

He predicted that S&P 500 companies' earnings per share (EPS) would increase by an annual average of 13~15% over the next two years. He analyzed that this could ease the burden of market valuation (price relative to earnings) through earnings improvement. Lakos-Bujas said, "There are various concerns surrounding the market, such as the AI bubble theory, but current high valuations are the result of appropriately reflecting next year's profit outlook, AI investment expansion, and expansionary fiscal policy," and added, "If the Fed implements three rate cuts next year—not the two the market expects—the S&P 500 could rise to 8,000 points."

JPMorgan had long been one of the few on Wall Street to stick to a pessimistic outlook. Earlier this year, it clung to an internal forecast (house view) that the year-end S&P 500 would remain around the 5,200 level, but as the U.S. stock market surged on the strength of AI-related stocks, it raised its target three times. As its bearish stance repeatedly diverged from the market's actual trend, last year Marco Kolanovic, who had been called 'the last bear of Wall Street,' was removed from his position as global head of research.

Other global IBs had long joined the bullish camp. According to Reuters, the average Wall Street strategists' S&P 500 forecast for next year is 7,490 points. Deutsche Bank presented the most aggressive outlook with a year-end target of 8,000 points, and Morgan Stanley in its global investment outlook released this month set a target of 7,800 points. Britain's Barclays forecast 7,400 points, Hong Kong-based HSBC 7,500 points, and France's Société Générale 7,300 points.

Reporter Beomjin Jeon forward@hankyung.com