CIBC sets 2026 S&P 500 price target, sees volatility ahead, says strategy head Chris Harvey

Core Viewpoint - CIBC Capital Markets projects the S&P 500 to reach 7450 by 2026, indicating a 9% increase from current levels, but anticipates a pullback before this target is achieved [1][2]. Market Conditions - Current market conditions are perceived as expensive, necessitating a repricing of risk due to various macroeconomic factors and the transition of the Federal Reserve [2][3]. - There is an expectation for a downward adjustment in earnings guidance as companies manage expectations after a strong year [2]. Earnings and Valuations - Earnings for 2027 are projected to be between 325 and 350, with expectations of multiple compression towards the end of the year, despite anticipated double-digit growth [6][7]. - The focus is shifting towards stocks with better risk-reward profiles and reasonable price-to-earnings (PE) ratios, moving away from high-risk stocks without a PE [4][5]. Sector Analysis - Opportunities are identified across various sectors, including medtech, software, and financials, rather than being concentrated solely in mega-cap tech [9]. - While some mega-cap tech stocks like Microsoft still present good risk-reward scenarios, the market is diversifying beyond this sector [8][9]. Financial Sector Insights - The financial sector, particularly companies like Goldman Sachs, is experiencing significant valuation movements, but there is a belief that a pause or pullback is necessary for sustainable growth [11][12]. - There is potential for investment in credit card companies and insurance firms for diversification and lower valuations, contingent on a pullback in high-performing stocks [12].