25 Years of S&P 500 Forecasts

It’s December which means strategists have been given their most difficult assignment of the year: forecasting what the S&P 500 will do over the next 12 months.

I almost laugh as I type that out because lol, what an impossible task.

500 companies. 11 sectors. Trillions in market cap.

Forecasting index earnings is one thing. But that’s only half the equation.

Strategists then have to figure out what multiple investors will pay for those earnings in 12 months time.

In high school, getting half of the math problem got you partial credit.

On Wall Street, getting half of it right could put you 500 points away from the index price at year-end.

A $300 earnings estimate for 2026 could be spot on, but if the multiple is 22x and you expected 25x, you’re almost 1,000 points off.

Tough job.

Lucky for me, my job is to simply visualize these targets for you and explain what they mean.

So let’s do that now.

Below I’ve outlined the strategist targets I could find as of 12/9 via Bloomberg. The average year-end 2026 target is 7,442 which implies a gain of 8.7%.

But how accurate are these targets, historically?

In the chart below I’m showing you what the average strategist expected for each year (since 2000) on the X axis vs what actually happened for that year on the Y axis.

The goal was to measure what actually happened to the S&P 500 vs what strategists thought would happen.

The average strategist implied gain in all years since 2000 was 5.1%.

The actual S&P 500 return for those years, on average, was 7.7%.

In the next chart I’m showing you the spread between these two series: the actual return minus the average strategist implied return for the year.

8/26 years saw worse returns than strategists implied.

18/26 saw better returns.

Note the years where strategists overestimated what the S&P 500 would do in the following year. Those are the red bars furthest to the left. They are all “shocks.”

Below I’m showing the same spread (between the actual return for the year and the strategist implied return) but with the years sorted chronologically.

I then annotated the periods of financial stress.

The main takeaway for me when looking at this data is that most of the time, strategists underestimate how the market will perform the next year. This is the case 70% of the time.

The 30% of the time where strategists overestimate the index’s return tends to happen during unforeseen “shocks.”

And those are nearly impossible to forecast.

Give strategists some grace. What a difficult job.

And for more reading on the subject, my friend Sam Ro puts out the very best content on year-end strategist targets. Here’s his latest.

Enjoy the rest of your week and thank you as always for reading!

Financial Advisors: if you are interested in my charts in your brand, check out Exhibit A.

You can also book a demo with me here.