Is It the Third Time Lucky? After the Index Reaches 6,000, Citi Changes Its S&P Target Once Again

The S&P 500 managed to finish last week just above the 6,000 mark, albeit by a narrow margin. If the index climbs another 2.4%, it would reach a new all-time high. Since the mid-April dip, the benchmark has rebounded impressively, rising 20.4%. This rally has prompted several Wall Street analysts to reassess and revise their forecasts, reversing previous pessimistic outlooks.

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One notable shift comes from Citigroup’s Scott Chronert and his team. Earlier this year, they had projected the S&P 500 would hit 6,500 by the end of 2025. However, amid growing trade tensions and fears that these issues could slow economic growth, they cut their target to 5,800. Now, in a new note published late Friday, they’ve revised it once again—this time to 6,300. That target represents a roughly 5% increase from current levels.

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Citi acknowledges that risks related to policy decisions still linger, but they argue that markets seem willing to look past these short-term uncertainties. With some trade deals stalled and legal limitations placed on certain White House actions, the fear over tariffs appears to be fading, in their view. “Trading moves aside, we expect investors will tend to look through shorter-term policy noise in aggregate,” Citi’s analysts wrote.

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Adding to their optimism is a gradually improving economic outlook. GDP growth projections for 2025 have been ticking up in recent weeks, and the labor market forecast is also looking more favorable. These developments have led Citi to raise its full-year earnings per share (EPS) estimate for the S&P 500 to $261, up from $255. However, that’s still lower than the $270 EPS they were forecasting at the beginning of 2024.

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According to Citi, the stock market can hold a price-to-earnings (P/E) ratio of 21, supported by companies adjusting to policy changes and uncertainties. The bank also sees long-term structural trends—especially in technology—helping reduce how sensitive corporate earnings are to economic cycles. This shift could justify higher P/E multiples going forward.

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Two main forces are expected to support this elevated valuation. The first is artificial intelligence. Citi believes that enthusiasm around AI is making a comeback, and that companies are continuing to invest in technology. So far, capital expenditure (capex) plans have remained steady, even in the face of political and economic uncertainty. Citi views this as a sign of confidence in long-term structural growth.

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The second factor is share buybacks. Citi notes that buybacks have increased on a net basis and could reach $1 trillion this year. This trend supports their earlier view that policy-related market volatility and questions about investment spending would lead corporations to return more cash to shareholders. “This aligns with a call we made earlier in the year,” the analysts said, emphasizing that buybacks are being used as a tool to stabilize stock performance in unpredictable times.

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Reflecting on their own shifting targets, the Citi team explained that these changes stem from the market’s volatility, which in turn has been fueled by uncertainties surrounding Trump-era policies. Yet they also point out that investors and companies are learning to navigate this environment. “With some experience behind, we are comfortable that fundamental volatility will be less than policy volatility,” they said.

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Looking ahead to the second half of 2025, Citi believes earnings will begin to improve again in 2026, once the policy dust settles. This future earnings growth could drive further gains. They expect modest mid-single-digit returns in the latter part of 2025 and advise investors to buy on dips rather than chase rallies. Their target for the S&P 500 by mid-2026 is back up to 6,500.

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Meanwhile, U.S. stock-index futures were showing mixed movement as of early Monday. Futures for the S&P 500 and Dow Jones Industrial Average were slightly up, while Nasdaq futures dipped slightly. In the bond market, the yield on the 10-year Treasury note slipped to around 4.49%. The dollar index also declined, and gold was trading lower at approximately $3,321 an ounce.

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