This article first appeared on GuruFocus.

Barclays raised its S&P 500 year-end 2026 target to 7,400 from 7,000, implying roughly an 11% gain from the current benchmark, citing stronger megacap technology and an easing policy backdrop.

The bank also lifted its 2026 EPS forecast for the S&P 500 to $305 from $295, saying technology earnings, driven by large-cap AI leaders, may outpace broader estimates.

Warning! GuruFocus has detected 5 Warning Signs with UBSFY.

Is SPY fairly valued? Test your thesis with our free DCF calculator.

Outside tech, Barclays warned inflation and higher unemployment could pressure consensus EPS, and noted U.S. midterm election years historically weigh on returns.

Strategists said expected Federal Reserve rate cuts would support valuations, especially cyclicals and growth names, but flagged a sharper downturn as the main near-term risk.

They added that tariff escalation appears unlikely, yet some price pressures remain "in the pipe," and consumer sentiment sits at multi-year lows.

The update was led by the Barclays strategist Venu Krishna, who noted that the AI race remained one of the driving forces of earnings and valuation in the global environment.

Shareholders will be monitoring the rate at which profits are being bumped and whether the big-cap wave is going to spill over to other market segments.