The S&P 500 closed at a fresh record of 7,818.93 on Tuesday, 6 October, gaining 0.58% on the day and taking its 2026 advance to 14%. For reference, the Nasdaq Composite is up 18.8%, while the Dow is up around 6.5%.
For UK retail investors, the important point is that this has been an earnings- and AI-led rally rather than simply a valuation expansion story. That matters because the S&P 500 is already trading at a substantial premium to European and emerging-market equities.
Why has the S&P 500 rallied 14%?
1. AI has become an earnings story
The biggest driver has been the extraordinary investment cycle around AI infrastructure. Nvidia, AMD, Micron, Broadcom, Marvell and the wider semiconductor supply chain are benefiting from hyperscaler spending on GPUs, networking, memory and data centres.
Goldman Sachs estimates AI investment is responsible for almost half of S&P 500 earnings growth in 2026. S&P 500 EPS grew 51% year-on-year in Q2, according to Goldman.
The market is now expecting Q3 earnings growth of around 29.5%, with revenue forecast to rise 12.3%. Particularly encouragingly, 72 of 116 companies that had issued Q3 EPS guidance had given positive guidance — the highest proportion in FactSet’s series going back to 2006.
2. Earnings have risen faster than valuations
This is an important distinction.
The S&P 500’s forward PE has fallen from roughly 22x at the beginning of 2026 to around 19.3x, even as the index has risen.
In other words, profits have done much of the heavy lifting.
Goldman raised its 2026 S&P 500 EPS forecast to $340 and its year-end index target to 8,000, arguing that the rally has been powered by corporate profit growth rather than multiple expansion.
3. Economic growth has held up
The US economy has proved more resilient than many investors expected. Strong consumer demand, corporate investment and AI-related capital expenditure have supported earnings despite higher oil prices and elevated Treasury yields.
At the latest record close, the market also received some relief from slightly lower bond yields and stabilising oil prices. Reuters quoted Wealthspire’s Oliver Pursche saying that lower oil prices reduce energy-inflation anxiety, which in turn helps bring yields down and supports equities.
4. Investors are looking through higher interest rates
This is perhaps the most surprising part of the rally.
The US and UK 10-year Treasury and Gilt yield has moved above 5%, creating a substantial alternative to equities. Yet investors have been prepared to tolerate higher rates because corporate earnings growth remains unusually strong.
United Kingdom 10-Year Bond Yield
Goldman’s Tony Pasquariello says the backdrop is ‘certainly not uncomplicated’ but still sees the underlying trend as higher, pointing to strong economic growth, earnings, fund flows and AI capex.
Where could the S&P 500 finish 2026?
The latest Wall Street forecasts show a remarkably wide range — particularly given that the index is already above many strategists’ targets.
| Firm | 2026 year-end target | vs 7,819* |
| BofA Global Research | 7,400 | -5.4% |
| Canaccord | 7,500 | -4.1% |
| BNP Paribas | 7,500 | -4.1% |
| Wells Fargo | 7,700 | -1.5% |
| Evercore ISI | 7,750 | -0.9% |
| RBC | 7,900 | +1.0% |
| Goldman Sachs | 8,000 | +2.3% |
| J.P. Morgan | 8,000 | +2.3% |
| Morgan Stanley | 8,000 | +2.3% |
| Deutsche Bank | 8,000 | +2.3% |
| UBS Global Research | 8,100 | +3.6% |
| Citigroup | 8,100 | +3.6% |
| HSBC | 8,100 | +3.6% |
Source: Reuters compilation, 6 October 2026. *Current S&P level.
Goldman’s Ben Snider expects 8,000, supported by 24% EPS growth this year. JP Morgan has also set an 8,000 target and raised its 2026 EPS forecast to $365, saying stronger cloud growth, larger backlogs and better cash-flow visibility are helping validate AI capital expenditure.
The most cautious major house is BofA. Savita Subramanian has a 7,400 target and has warned that the market is ‘overdue for a pullback’, citing inflation, Fed policy, earnings quality and credit risks.
Investor takeaway: with the index already at 7,819, the consensus case now implies relatively modest further upside. The bull case increasingly depends on earnings continuing to beat expectations rather than investors paying a higher valuation multiple.
The S&P 500’s biggest winners in 2026
The extraordinary dispersion between individual stocks is one of the most striking features of 2026.
| Rank | Stock | YTD* | Why it has surged |
| 1 | SanDisk (SNDK) | +599% | AI-driven storage demand, tight NAND supply and pricing power |
| 2 | Moderna (MRNA) | +522% | Breakthrough cancer-vaccine data and renewed confidence in its oncology pipeline |
| 3 | Dell Technologies (DELL) | +355% | AI server demand and accelerating data-centre infrastructure spending |
| 4 | Micron (MU) | +262% | AI-driven HBM/memory shortage and pricing boom |
| 5 | Marvell (MRVL) | +237% | AI networking, custom silicon and data-centre connectivity |
| 6 | Bloom Energy (BE) | +237% | Growing demand for on-site power for AI data centres |
| 7 | Intel (INTC) | +212% | AI/semiconductor recovery and renewed investor confidence |
| 8 | Lumentum (LITE) | +203% | Optical connectivity demand from AI data centres |
| 9 | AMD (AMD) | +202% | AI accelerator growth and stronger competitive position |
| 10 | HPE (HPE) | +194% | AI servers, networking and data-centre infrastructure |
*YTD figures based on latest available 6 October data.
The message is unmistakable: AI infrastructure dominates the leaderboard.
SanDisk has been a particularly extreme example. Reuters reported that strong AI-related storage demand and a global memory shortage drove much stronger-than-expected forecasts, with demand expected to remain robust well beyond 2026.
How to invest in semiconductor stocks: A UK beginner’s guide 2026
Moderna is the major exception. Its extraordinary rally has been driven by positive Phase 3 results for its personalised cancer vaccine developed with Merck.
10 biggest S&P 500 underperformers
The other side of the market tells a very different story.
| Stock | YTD* | What went wrong |
| Corteva | -79% | Apparent collapse largely reflects the Vylor seed-business spin-off rather than equivalent economic destruction |
| Fair Isaac | -59% | Mortgage-credit scoring disruption and regulatory uncertainty |
| CoStar | -59% | Weakness in property-related businesses and expensive growth-stock derating |
| AppLovin | -59% | Heavy AI/software valuation concerns and sharp reversal after an enormous prior run |
| Intuit | -56% | Slower growth expectations and pressure on expensive software valuations |
| Boston Scientific | -56% | Healthcare valuation pressure and weaker sentiment |
| Lululemon | -55% | Slowing consumer momentum and weaker growth expectations |
| Insulet | -52% | Healthcare/medical-device sell-off and concerns around growth |
| Fiserv | -50% | Weak investor sentiment following corporate restructuring/growth concerns |
| Rollins | -49% | Consumer/defensive valuation compression and weaker expectations |
One important caveat: Corteva’s apparent 79% collapse is misleading. Its seed business was spun out into Vylor, with Corteva shareholders receiving Vylor shares. Combined, the value of the two businesses was roughly unchanged around the separation.
This is also why looking only at the headline index can be deceptive. The median S&P 500 stock is up only about 6% YTD, versus 14.2% for the index, with 40% of constituents still down.
S&P 500 valuation: expensive, but not alone
The S&P 500 remains substantially more expensive than most major international markets.
Valuation snapshot
| Market | Forward PE |
| S&P 500 | 19.3x |
| MSCI World | 17.9x |
| MSCI Europe | 14.0x |
| FTSE 100 | 12.0x |
| MSCI Emerging Markets | 9.7x |
Source: JP Morgan Asset Management, 2 October 2026.
That premium partly reflects the S&P 500’s superior exposure to highly profitable technology and AI companies. But it also means the US market has less valuation protection if earnings disappoint.
For UK investors, the contrast is particularly striking: the FTSE 100 trades at around 12x forward earnings, compared with 19.3x for the S&P 500.
2026 YTD — major markets
| Index | 2026 YTD* |
| 🇯🇵 Nikkei 225 | +39% |
| 🇺🇸 Nasdaq Composite | +18.7% |
| 🇺🇸 S&P 500 | +14.2% |
| 🇬🇧 FTSE 100 | ~+13% |
| 🇨🇦 TSX | +12% |
| 🇩🇪 DAX | ~+6% |
| 🇫🇷 CAC 40 | ~+1% |
| 🇭🇰 Hang Seng | -6% |
| 🇮🇳 Sensex | -15% |
*S&P 500, Nasdaq, Dow and Russell figures are through 6 October; international figures are latest available around 5–6 October and can vary slightly by close and data provider.
Sharesify investor verdict
S&P 500 closed at a fresh record and the new high increasingly represents an earnings story, not simply an AI-fuelled valuation bubble. That is the bullish argument: if AI infrastructure spending translates into sustained earnings growth, today’s premium valuation can potentially be absorbed by higher profits.
The bear case is that expectations are now extremely high, Treasury yields are above 5%, market breadth is narrow and the index is already above several Wall Street year-end targets. The equal-weighted S&P 500 remains more than 5% below its peak, highlighting how dependent the headline index is on a relatively small group of mega-cap and AI-linked winners.
For UK retail investors using a Stocks & Shares ISA or SIPP, the key question is therefore not simply whether US equities can rise further, but whether the additional return available from the S&P 500 justifies its valuation premium over cheaper markets such as the FTSE 100, Europe and emerging markets — particularly after allowing for sterling/dollar currency movements.
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