Citi Is Sticking With Its S&P 500 Target Despite Iran Conflict and Tariff Risk

TLDR

• Citi is keeping its year-end S&P 500 target at 7,700 despite growing risks
• The bank’s base case assumes $320 in index earnings for 2026, now seen as conservative
• The Iran conflict is cited as the most immediate threat to the outlook
• AI disruption, private credit, and tariffs are also flagged as risks
• The S&P 500 is currently down ~6.7% year-to-date, sitting near 6,417

Citi is holding its S&P 500 year-end price target at 7,700, even as a growing list of risks threatens what the bank calls a “goldilocks” economic scenario.

The forecast is built on projected earnings of $320 per share for 2026. That number looked aggressive at the start of the year. Now Citi says it looks conservative, after a strong Q4 reporting season lifted full-year 2025 earnings to around $276.

Bottom-up consensus has already moved to $321.3, slightly above Citi’s own estimate.

The bank has also laid out two alternative scenarios. A bull case of 8,300 accounts for stronger profit growth and higher valuations. A bear case of 5,700 reflects weaker fundamentals and falling multiples.

The S&P 500 is currently trading near 6,417. That means hitting the base-case target would require a gain of roughly 20% from current levels.

The index is down about 6.7% year-to-date, after mega-cap stocks gave back a big chunk of last year’s gains.

Geopolitical and Macro Risks

Citi’s strategists, led by Scott Chronert, pointed to the Iran conflict as the most immediate concern. Higher oil prices from prolonged conflict could weigh on consumer spending and offset any benefits from fiscal policy.

The team also flagged artificial intelligence disruption risk, concerns in private credit markets, and ongoing uncertainty around global trade policy and tariffs.

On the macro side, Citi’s economists expect the Federal Reserve to cut rates three times by 25 basis points between June and September, bringing rates to the 2.75–3.0% range by year-end.

GDP growth is expected to accelerate modestly year-over-year before slowing in the second half of the year.

Earnings and Market Breadth

Information Technology is the strongest sector for upward earnings revisions, with 2026 estimates raised more than 11% since January.

The so-called Elite 8 mega-cap companies are still driving most of the S&P 500 earnings revision activity. But Citi notes the rest of the index is now contributing more.

The “other 492” companies are expected to post low-double-digit earnings growth in 2026, after coming out of an earnings recession in 2024.

Year-to-date, the Elite 8 are down roughly 10% while the broader index has posted a small gain. That’s a reversal from 2025, when mega-caps returned around 25% versus 14% for the rest of the market.

Small-cap and mid-cap indices have held up better, up more than 3% and 4% respectively in 2026.

Citi’s Levkovich sentiment index has moved to the high end of neutral.

The S&P 500 is currently near 6,417, down approximately 6.7% year-to-date.

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