Second-quarter reporting put the AI trade back at the centre of US equities after earlier worries about hyperscaler capex and free cash flow. The S&P 500 set fresh record highs, and JPMorgan raised its target to 8,000 for 2026 after lifting an earlier 7,600 call to 7,800 in June; the new level implies about 3% upside from last week’s close. The index first cleared 5,000 in February 2024, after generative AI momentum built from the launch of OpenAI’s ChatGPT large-language model in November 2022. Earlier in 2026, following the outbreak of war between the United States and Iran, the benchmark fell more than 8.5% into March and slid towards 6,300 as markets repriced inflation risks.
Earnings detail helped to ease those concerns. Alphabet shares dropped 5% after it raised capex guidance to $195bn–$205bn, a $15bn rise at the midpoint, while forecasts also point to Magnificent Seven spending on AI infrastructure accelerating towards $750 in 2026. Across the index, 86% of companies have beaten EPS expectations and 77% topped revenue forecasts; blended Q2 2026 earnings growth stands at 47.4% year on year, the strongest in almost five years. For Q3, earnings growth estimates rose from 14% in January to 21.7% recently, with revisions broadening beyond technology to energy and other cyclical sectors.
September Seasonality And Positioning For Upside
As we head into September 2026, the S&P 500 is trading near record highs around 7,800, fueled by an outstanding 47.4% year-over-year earnings growth in the second quarter. With Wall Street raising its year-end targets to 8,000, we believe derivative traders should position themselves to capture this upward momentum. However, we must also prepare for short-term bumps given the historical patterns of the coming weeks.
Historically, September is the most challenging month of the year for the S&P 500, averaging a decline of roughly 1.2% over the last several decades. We should view any seasonal dip over the coming weeks as a prime buying opportunity rather than a reason to panic. Using bull call spreads on the SPX with October or November expirations will allow us to limit risk while positioning for the march toward 8,000.
Options Strategies And Risk Management
With tech giants accelerating their AI infrastructure spending toward $750 billion this year, corporate fundamentals remain incredibly robust. Since Q3 earnings estimates have already been revised upward to 21.7%, we can expect implied volatility to rise as the next earnings season approaches. Selling out-of-the-money put options on mega-cap tech stocks is an excellent way to generate premium income during brief market pullbacks.
While optimism is high, the lingering inflationary impacts of the earlier conflict in Iran remind us that volatility can return quickly. To hedge against sudden downside moves, we suggest keeping a portion of our portfolios in cheap, out-of-the-money protective put options. This balanced approach ensures we stay heavily exposed to the AI-driven upside while remaining protected against unexpected geopolitical shocks.
