Barclays, Deutsche Bank raise S&P 500 forecasts as bull run continues

By Rashika Singh and Akriti Shah

Sept 10 (Reuters) - Barclays and Deutsche Bank raised their year-end targets for the S&P 500 on Wednesday, citing stronger corporate earnings, resilient U.S. economic growth and optimism around artificial intelligence.

Deutsche Bank increased its target to 7,000 from 6,550, while Barclays raised its forecast to 6,450 from 6,050.

The index touched a record high of 6,555.97 earlier on Wednesday and has risen 11.2% so far this year.

Barclays and Deutsche Bank join a spate of banks that recently upgraded their view on the U.S. stock market despite lingering concerns about President Donald Trump's tariffs on the economy and corporate earnings.

"We expect equity valuations to remain elevated by historical standards, driven by higher payout ratios, perceptions of higher trend earnings growth...and earnings resilience with fewer significant drawdowns," says Binky Chadha, analyst at Deutsche Bank.

The S&P 500 has rallied more than 30% from its April lows, buoyed by resilient earnings and investor enthusiasm around the AI boom.

"Corporate earnings are solid and global GDP growth is stabilizing, but US labor market risks are worsening," say Barclays strategists, whose target suggests the S&P could end the year just below current levels.

Data on Friday showed U.S. job growth weakened sharply in August and the unemployment rate rose to a near four-year high of 4.3%.

Signs of a cooling labor market and tame inflation have increased expectations of U.S. Federal Reserve rate cuts this year and next, further supporting equities.

Barclays expects three rate cuts before year-end, which it says will help offset labor market weakness.

In addition, it lifted its 2026 target for the S&P 500 to 7,000 from 6,700.

Investors will be closely watching the Fed's policy meeting next week for clues on the rate cut path and broader market direction.