Key Highlights:

• Barclays lifts S&P 500 year-end forecast to 6,050, implying a 1.32% upside from current levels.
• Index gained 6.2% in May—its best monthly performance since November 2023.
• Upgraded Wall Street outlooks and easing trade tensions support the bullish momentum.

The S&P 500 hovered just below its recent peak of 5,988.5 in Wednesday’s session, maintaining strength as markets digested a string of forecast upgrades from leading Wall Street institutions. Among the most notable, Barclays raised its year-end target for the index from 5,900 to 6,050, pointing to improving sentiment and the expectation of earnings normalization by 2026.

This move aligns Barclays with a growing list of bullish revisions. Goldman Sachs, UBS, Deutsche Bank, and RBC Capital have all upgraded their projections in recent weeks, attributing the shift to stronger-than-expected Q1 results and the belief that tariff-related disruptions will gradually fade through 2025.

Barclays’ Forecast Rationale

Led by strategist Venu Krishna, Barclays maintained its EPS forecast of $262 for 2025, while introducing a 2026 estimate of $285—alongside a long-term index target of 6,700, representing a nearly 12% gain from current levels.

Their optimism is rooted in the expectation that trade-related headwinds will be “absorbed through the remaining quarters of FY25,” allowing markets to re-enter a more stable growth trajectory by 2026. While inflation and margin pressures remain areas of concern, Barclays sees limited direct drag from tariffs by next year.

May Rally Sets the Tone

The revised outlook follows a robust May rally, where the S&P 500 soared 6.2%, its strongest monthly gain since November 2023. The surge was driven by multiple tailwinds:

• A softening in President Trump’s trade rhetoric eased geopolitical concerns.
• Resilient corporate earnings, especially in AI-related and cyclical sectors, reinforced bullish sentiment.
• Cooler-than-expected inflation prints helped reset expectations around potential Fed rate cuts, providing an additional lift to equities.

Technical Overview

The index is currently consolidating near 5,988, following a sharp rebound from 5,867.75 on June 3. Momentum indicators remain largely supportive:

• Short-term EMAs (5, 10, 30) maintain a bullish alignment, though they began flattening late in the session, hinting at a temporary slowdown.
• MACD histogram is narrowing, and convergence between MACD and signal lines suggests a reduction in buying pressure.

A decisive break above 5,988.5 could unlock fresh upside potential. On the flip side, a drop below 5,960 may trigger a short-term pullback.

Caution at the Highs

Despite the bullish backdrop, traders should remain alert to potential volatility as the index approaches record territory. Key macro data—including wage growth, consumer spending, and inflation figures (CPI/PCE)—could still sway sentiment sharply.

If inflation data surprises to the upside, it may fuel renewed concerns over delayed Fed easing, reintroducing risk.

Nonetheless, as long as support at 5,940 holds, the path of least resistance remains upward. With Barclays’ 6,050 target now within reach, summer positioning is likely to stay constructive though caution is advised at these elevated levels.

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