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Michael Kantro predicts that applying a 20x price-to-earnings ratio to 2027 estimated EPS of $405 results in a year-end SPX target of 8100.
He adds that potential Federal Reserve rate hikes could add or subtract 1 P/E point, which would affect the S&P 500 index by roughly 400 points. Kantro states he remains in the “holder for longer” camp.
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Earlier this year, Kantro attributed a roughly 10% lower market P/E ratio to expectations for Federal Reserve policy and higher debt costs for the Mag 7 companies, according to a prior note. He also recently commented that the reopening of the Strait of Hormuz could decrease the likelihood of a U.S. Fed rate increase, as seen in his earlier analysis. These views provide further context for his latest projections on S&P 500 pricing.