The S&P 500 (SNPINDEX:^GSPC) closed at a record 7,798.99 on Aug. 13, its 27th record close of 2026, and finished Sept. 22 at 7,764.64, putting its 2026 gain at about 13%. Through that close, the index had still never ended a day above 7,800.
I think it ends 2027 above 9,000, a level about 15% higher than the Aug. 13 record.
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That sounds aggressive for a market this close to its record. Run the numbers, though, and it isn’t. From the Sept. 22 close, 9,000 is a gain of about 16%, which comes to about 12% a year through the end of 2027. The index has already delivered more than that in 2026, with a quarter of the year still to go.
And the pace isn’t even the main reason for confidence. The earnings growth the prediction requires is ordinary. Here’s the math it rests on.
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9,000 needs about 16% more expected earnings
An index level is two numbers multiplied together: the earnings its companies are expected to produce, and the price-to-earnings multiple the market puts on them. According to FactSet’s Sept. 18 earnings report, the S&P 500 trades for 19.1 times the earnings its companies are expected to deliver over the coming 12 months, below the five-year average of 19.8.
At the Sept. 22 close, that price-to-earnings multiple works out to about 19.4 — meaning the market is pricing about $400 of expected earnings.
Keep the price-to-earnings multiple at 19.4, and 9,000 requires about $463 of expected earnings by the end of 2027, an increase of about 16%. Even at the index’s 10-year average of 19.0 times expected earnings, the bar only rises to about $474.
Either way, the prediction needs expected earnings to climb about 16% to 18% over the next five quarters, with no help from a richer valuation.
The prediction rests on 2028
By the end of 2027, the coming 12 months of earnings means calendar 2028. So the $463 bar comes down to what analysts will expect companies to earn in 2028 — estimates that are only starting to trickle out.
The forecasts that do exist get the index most of the way. Analysts’ bottom-up estimates call for about $362 of index earnings in 2026, up 31.8% from 2025, and about $417 in 2027, up 15.2%. From $417, the $463 bar asks 2028 to add about 11%. Each step is smaller than the last.
Is 11% a lot? By FactSet’s count, the index’s earnings growth has averaged 16.4% over the past five years and 10.3% over the past 10. In other words, the prediction needs 2027 to land near its forecast and 2028 to be a roughly average year.
And lately, estimates have been moving up, not down. Analysts raised their third-quarter earnings estimates by 1.6% between June 30 and the report, when a cut of about 2.2% has been the norm over the past five years.
What breaks the math?
The biggest risk is the price-to-earnings multiple itself.
Measured against earnings companies have already delivered rather than expected earnings, the index costs more than 25 times earnings, richer than its own averages over the past five and 10 years. The market is reasonably priced only if the forecast earnings show up.
They might not. Much of 2026’s surge comes from the semiconductor industry and oil-lifted energy earnings. And the forecast itself slows sharply, to 18.2% growth in the first quarter of 2027 and a nearly flat 1.5% in the second. Give 2027 half its forecast growth, let 2028 repeat that slower pace, and an unchanged multiple leaves the index below 8,200.
Interest rates could pressure the multiple of expected earnings, too. The Federal Reserve delivered its first rate increase since 2023 on Sept. 16, saying inflation remains elevated, and officials’ updated projections suggest another increase may come before year-end. Higher rates can make investors pay less for each dollar of future earnings, which raises the earnings bar further.
Still, the prediction doesn’t require much to go right. The market doesn’t have to get more expensive. Earnings have to slow the way analysts already expect, and then grow at about their decade average for one more year.
Of course, more rate increases or a stumble in chip spending could slow the climb. But the index needs only about 12% a year from here, and its companies’ earnings are forecast to grow faster than that through 2027. I think it gets there.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
