By Jacob Sonenshine
S&P 8000, here we come.
Yes, everyone seems to be afraid of the stock market's current rally. A continuing conflict in the Middle East, high oil prices, and inflation concerns will do that. Yet the S&P 500 index is rising 2.3%, to 7395, this past week, while the Nasdaq Composite is up 4.3% and the Dow Jones Industrial Average has advanced 0.1%. The Nasdaq and the S&P 500 are even on track to close out the week at record highs.
Driving the gain: a superstrong earnings season. Through Thursday, 87% of S&P 500 members had beaten profit estimates, according to Evercore ISI data. While the few companies that came up short had their stocks punished, those that beat on both top and bottom lines saw their stocks gain 1.1% on average. Those gains have been the bedrock of the stock market rally.
Tech earnings have been even better. Analysts expect earnings for the VanEck Semiconductor exchange-traded fund to rise 46% annually in aggregate from the end of 2025 through the end of 2027, according to FactSet. Profits from chip companies like Nvidia and Taiwan Semiconductor Manufacturing alone could help drive S&P 500 earnings per share up 18% annually to $378 in 2027. As long as the data-center story continues apace -- and it has seen no signs of slowing -- the index can reach that number.
But rallies aren't meant to last forever. The VanEck Semiconductor ETF has gained 11% this past week, and is up 57% for the year. A quick look at the chart shows a nearly straight line upward, and you wouldn't be wrong to think they look ridiculously overbought. The "buying opportunity closed," writes Chris Harvey, CIBC Capital Markets' head of equity and portfolio strategy -- at least for everyone but the short-term traders.
Still, an S&P rally to 8000 seems feasible even if the chip rally slows. That numner is only 8% away from current levels, and it would put the index up a not-so-outrageous 17% for the year. Drawdowns have been shallow in the past several months, with even the Iran conflict causing a mere 9.1% drop -- not even technically a "correction."
History suggests getting there won't be all that hard. Since 1960, the S&P 500 typically gains 12% over the 12 months following a record high, according to UBS Wealth Management data.
With the S&P 500 trading at 21.2 times earnings, valuations are always a concern, but with the job market growing but not too fast, the markets now expect the Federal Reserve to remain on hold until the middle of next year. That might actually be a good thing. "If you have stability in interest rates, then the multiple is sustainable," says David Stubbs, AlphaCore Wealth Advisory's chief investment strategist.
Market strategists have been reluctant to raise their estimates that high. Deutsche Bank's Bankim Chadha reiterated his 8000 target this past week "on the back of strong first-quarter beats [and] gravity-defying strength for megacap growth and tech."
At the end of the day, fundamentals are stronger than fears -- and patient investors will ultimately reap the rewards for steadfastness.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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(END) Dow Jones Newswires
May 08, 2026 21:31 ET (01:31 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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