BMO sets 2026 year-end target of 7,380 for S&P 500

Investing.com -- BMO Capital has initiated coverage of the S&P 500 with a 2026 year-end target of 7,380, projecting an “expected return of about 8% for U.S. equities” this year.

In an outlook note, François Trahan, an analyst at BMO Capital, said the firm is “bullish, and even more so in select foreign markets,” despite what he described as an unusually uncertain macro backdrop.

Trahan wrote that “the current backdrop is still mired in risks,” noting that policy visibility is weaker than in past decades.

Even so, BMO argues that “monetary and fiscal stimulus around the world provide solid support for equity prices.”

If markets continue trading primarily on macro factors, he said, “we are looking at an ideal setup for Risk-On markets,” with investors favouring cyclical assets in 2026.

BMO Capital’s thesis rests on the view that stimulus is sufficient “to revive the U.S. economy despite all the longer-term challenges it’s facing: deteriorating demographics, an affordability crisis, an unsustainable amount of debt, and the list goes on.”

Trahan added that equities remain focused on near-term dynamics. “The stock market is mostly focused on what takes place in the next few quarters,” he wrote.

Still, BMO highlighted inflation as the primary cyclical risk ahead. “It seems clear that the inflation dynamic is different than it used to be,” Trahan wrote, warning that shifting macro relationships “will alter the investment playbook as we know it.”

The firm maintains overweight recommendations on industrials, materials, energy and financials and underweights on consumer staples, health care, real estate and utilities.

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