Citi lifts S&P 500 target

Investing.com -- Citi analysts said they raised their year-end 2025 S&P 500 target to 6300, driven by "a marginally more constructive fundamental view and an expectation for persistency of the current valuation backdrop." 

Looking further ahead, the bank’s mid-2026 target of 6500 implies a high-single-digit percentage upside over the next twelve months, underscoring their "structural bullishness on U.S. large cap." 

Citi maintains a preference for growth stocks, as the artificial intelligence (AI) theme continues to gain momentum.

The first half of 2025 saw a "whipsaw" market, according to Citi. Their initial expectation for a flat first half followed by a stronger second half was challenged in April, when tariff risks led to a target downgrade. 

However, a subsequent rally, fueled by Q1 results and renewed confidence in the AI trade, demonstrated "broader confidence in corporate adaptability and, with it, fundamental stability."

Citi’s revised S&P 500 base case of 6300 for year-end 2025 and 6500 for mid-2026 effectively brings them back to their initial directional outlook for the year. 

They have also increased their full-year index earnings estimate to $261 from a previous $255. While this remains below the initial $270 projection and the current $264 consensus, Citi notes that "as worst-case tariff impacts are negated, a modestly higher terminal multiple is applied."

Regarding valuation, Citi acknowledges that the S&P 500 is trading "toward the higher end of its historic valuation range," but they "presume the index can hold 21x forward." 

Citi also highlights an "ongoing structural shift in earnings contribution away from Cyclicals and toward Growth," which provides context for historical valuation comparisons.

Citi notes that while concerns persist regarding consumption trends and policy implications on rates/currency, the “AI trade seems to be gaining renewed momentum.”