(Reuters) -Barclays on Wednesday raised its 2025 year-end target for the S&P 500 to 6,450 from 6,050, its second in three months, on stronger-than-expected corporate earnings, resilient U.S. economic growth and optimism around artificial intelligence.
The British brokerage joins a growing list of global research firms that have raised targets on the benchmark index, including Citigroup and HSBC.
After hitting lows in April following President Donald Trump’s “Liberation Day” tariffs, the S&P 500 has rallied, steadily – gaining about 30% – buoyed by resilient earnings and investor enthusiasm around the AI boom.
However, the new target is slightly below the index’s last close of 6,512.61 points, indicating labour market risks.
Data on Friday showed U.S. job growth weakened sharply in August and the unemployment rate rose to a near four-year high of 4.3%, slowing the momentum a little.
“Corporate earnings are solid and global GDP growth is stabilizing, but US labor market risks are worsening,” said Barclays strategists.
The AI-centric growth narrative, immediate-term rate cuts and favorable seasonality after the July-September quarter will be supportive of equities through year-end, it noted, adding that these expectations were probably already priced in.
The brokerage expects three rate cuts by the U.S. Federal Reserve before the year-end, which it says will help offset labor market risks.
It also raised its 2025 earnings-per-share (EPS) estimate for the S&P 500 to $268 from $262.
In addition, it lifted its 2026 year-end target for the index to 7,000 from 6,700, and forecast EPS of $295, up from $285.
Barclays made several sector calls, upgrading its view on the broader U.S. tech space to “positive”, citing strong data center demand and easing concerns around AI disruption in software.
It downgraded U.S. healthcare to “neutral” due to regulatory overhangs, while upgrading the materials sector to “neutral” on improving outlooks for metals and agricultural chemicals.
Investors will be closely watching the Fed’s policy meeting next week for clues on the rate cut path and broader market direction.
(Reporting by Rashika Singh in Bengaluru; Editing by Janane Venkatraman)
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