Citigroup predicts the S&P 500 will reach 7,700 by the end of 2026 with AI and earnings driving gains

15 December 2025

In a detailed outlook released on December 15, 2025, Citigroup offered one of Wall Street’s most bullish forecasts for next year’s stock market, setting a year-end target of 7,700 for the benchmark S&P 500 index. That projection implies a gain of about 12.7 percent from the index’s most recent closing level, and Citi’s strategists are pointing to robust corporate earnings and the enduring influence of artificial intelligence investments as key drivers behind their optimism. This forecast joins several on Wall Street that see continued upside in equities next year, though it also acknowledges the challenges of sustaining lofty valuations and the potential for heightened volatility as markets adjust to evolving economic conditions.

At the core of Citi’s outlook is the belief that earnings growth will remain healthy in 2026, with the bank’s analysts forecasting that S&P 500 earnings per share will reach around $320 by year-end. That estimate sits above the current Wall Street consensus, which is slightly more modest, and suggests that corporate profits will continue to expand even as economic conditions shift. Citi’s projection reflects confidence in the ability of American companies to translate revenue growth into bottom-line gains, particularly in sectors that are successfully adapting new technologies and harnessing productivity gains.

The role of artificial intelligence in this projection cannot be overstated. Citi’s strategists noted that AI will remain “a key theme” for markets in 2026, with the focus gradually shifting from firms that supply the basic infrastructure of the AI boom toward companies that integrate AI into their core operations. This anticipated shift reflects a broader recognition across financial circles that as the technology matures, the beneficiaries will be those companies that use AI to enhance productivity, expand market share and innovate rather than just those that build the hardware and software foundations for the technology. Citi described this evolution as potentially creating a “winner versus loser” dynamic within the market, where stock selection will become increasingly important.

Although AI and earnings are central to Citi’s optimism, the firm tempered its outlook with several cautions. One of the challenges facing markets is the starting point for valuations, which remain high by historical standards. Citi acknowledged that while lofty price-to-earnings ratios do not make further gains impossible, they increase the pressure on underlying corporate performance to justify higher valuations. In other words, markets will need to see sustained earnings growth and meaningful adoption of productivity-enhancing technologies to support the expected rise in prices, rather than relying solely on multiple expansion.

Citi also sketched out alternative scenarios in its outlook, illustrating how market conditions could diverge markedly in the coming year. In its so-called bull case, where favorable economic and corporate earnings trends align strongly, the S&P 500 could climb as high as 8,300. Conversely, in a bear case driven by slower profit growth or broader economic stress, the index might fall toward 5,700. These scenarios highlight the inherent uncertainty that accompanies any long-term forecast, and they underscore that even generally optimistic projections contain a range of potential outcomes based on shifting conditions in markets, interest rates and global economic performance.

Citi’s forecast aligns with other projections from major investment banks and wealth managers that are also looking for double-digit returns in the coming year, though there is variation in the specific targets. For instance, Oppenheimer Asset Management’s most bullish forecast sees the S&P 500 topping 8,100 by the end of 2026, while UBS Global Wealth Management has likewise issued a 7,700 target. These varied estimates reflect broad confidence on Wall Street that equities can continue to trend upward even as some risks persist, including inflation concerns and potential shifts in Federal Reserve policy.

Part of the backdrop for these optimistic forecasts is the context of the current bull market, which has now entered its fourth year. Sustained gains across major indices have been fueled by a combination of strong corporate earnings, healthy capital spending in technology and other sectors, and investor confidence that central banks will manage monetary policy in a way that supports growth without letting inflation run unchecked. Yet after years of expansion, markets have shown episodes of volatility, and strategists warn that price swings could become more pronounced as investors reassess risk, rotate between sectors and react to macroeconomic data.

Citi’s recommendation for investors is clear: with a more nuanced market environment on the horizon, broad diversification and careful stock selection will be essential. In particular, identifying companies that are effective adopters of AI and other transformative technologies may be as important as focusing on those that helped build the foundational infrastructure. This nuance suggests that the next phase of market gains could reward not just passive exposure to indexes but active strategies that emphasize companies with strong fundamentals and growth prospects.

As the year winds down and attention turns to 2026, investors and analysts alike will be watching closely for early signals that either reinforce or challenge these projections, such as quarterly earnings reports, economic data on inflation and jobs, and central bank decisions on interest rates. The outcome of these developments will help shape whether markets can sustain the impressive gains of recent years or enter a period of recalibration. Citi’s 7,700 S&P 500 target provides a benchmark for expectations, but its range of scenarios also makes clear that adaptability and vigilance will be key attributes for investors navigating the year ahead.