The S&P 500 Just Hit a Record High -- Here's How Much Higher It Can Climb, According to the Wall Street Consensus

The S&P 500 (SNPINDEX: ^GSPC) reached an all-time high for the 28th time this year on Oct. 6. The bull market is nearly four years old, and it shows few signs of slowing down. In that time, the S&P 500 has climbed 117%, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) is up 163%, thanks to its higher concentration of artificial intelligence (AI) stocks, which are driving the market higher.

While some investors may fear that stocks have gotten expensive and the bull market is getting old, Wall Street analysts still see plenty of upside left for stocks. FactSet recently published its bottom-up price target for the S&P 500, which aggregates the median analyst price target for every company in the index. By next September, analysts expect the S&P 500 to reach 9,275. That's another 19% gain from the current level as of this writing.

But there are some important details investors can't afford to overlook before piling more cash into stocks right now.

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Are analysts overly optimistic?

Another 19% gain in the index is well above the historical average for the S&P 500, which has produced an annualized compound total return of around 10%. However, investors know the stock market doesn't go up in a straight line year after year, and it rarely produces returns in line with the long-run average. In fact, in years when the S&P 500 posted a positive return, the average return was around 21%, right in line with analysts' price targets.

That said, there are some very optimistic expectations built into analysts' price targets. First and foremost is earnings growth. Long-term earnings growth expectations have climbed significantly higher in 2026. At the start of the year, analysts expected compound earnings growth over the next five years of around 18%. That's already a very high expectation, considering the 13% average earnings growth over the last decade. Today, analysts expect the index constituents to deliver aggregate earnings growth of over 27% per year over the next five years.

That growth is driven by the big tech stocks that have come to dominate the index. Analysts expect the information technology sector to grow earnings 41.3% in 2027. That's an increase from previous estimates of 32.2% 2027 earnings growth in June and 24.6% in March.

Rising expectations have pushed many of the biggest technology companies to account for a larger portion of the S&P 500 in recent months. The top three companies in the index account for 21% of its value as of this writing. That could create a lot of variance in the index's actual results relative to analysts' outlooks.

Making smart investments in today's market

The bottom-up price target for the S&P 500 reflects analysts' optimism that the big tech winners of the AI boom will continue producing strong revenue and earnings growth well into next year and beyond. That's led to some of the highest long-term expectations for the index in history, which means there's a lot of room for downside error.

Investors willing to do their homework and develop reasonable expectations for future earnings, return on invested capital, and cash flows for individual companies over the next few years can still find great opportunities in today's market. In fact, while analysts have raised their expectations for tech stock earnings, they've also tempered them in other areas. There may be many opportunities hiding in other sectors. Finding discrepancies between your own outlook and the market's is the only way to outperform in the long run (as long as you're right).

For index investors, it may be worth considering an equal-weight S&P 500 index if you expect the bull market to broaden out with tech underperforming expectations while other sectors pick up the slack. At the end of the day, however, there's nothing wrong with putting money in a simple S&P 500 index fund and matching the returns of the benchmark index. Over the long run, that strategy has consistently produced positive returns for patient investors.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems. The Motley Fool has a disclosure policy.