1 Wall Street Analyst Sees the S&P 500 Climbing to 8,000 by Year-End. Is It Time to Buy Stocks?

Shrugging off any fears of a potential artificial intelligence (AI) stock bubble, Goldman Sachs investment strategist Ben Snider recently came out and kept his 8,000 year-end target on the S&P 500 (SNPINDEX: ^GSPC). That's about 4.5% upside from Friday's Oct. 16 close.

Snider also has a sanguine view on stocks for next year, placing an 8,700 year-end 2027 price target for the S&P 500. That would be an 8.75% return next year if the index were to finish 2026 at his 8,000 target. Snider believes these gains will be driven largely by earnings growth, not valuation expansion. On that front, he sees S&P 500 earnings growing by 36% this year, slowing to a solid 11% growth next year.

A historically strong time to invest

Snider's year-end 2026 and 2027 S&P 500 predictions come ahead of what is historically one of the best times to invest in the stock market, right ahead of the midterm elections. In fact, since 1938, the S&P 500 has generated a positive return from November through November of the following year after midterm elections 95% of the time.

In addition, the fourth quarter of midterm election years has historically been the strongest quarter for stocks. Since 1950, the S&P 500 has risen in Q4 of midterm election years 84% of the time, with an average return of 6.6%. Based on that, Snider's year-end 2026 target could prove to be low.

Meanwhile, stocks tend to carry their strong Q4 performance into the following year during midterm election years. Since 1950, the S&P has averaged a 7.4% gain in the first quarter following midterm elections, with a positive return in 95% of quarters, according to the Carson Group. The second quarter is also usually strong, with the S&P 500 generating an average annual return of 5% over these three months and rising in 74% of years.

While the Goldman Sachs analyst sees most of the S&P 500's gains coming from earnings growth, there is also the potential for multiple expansion. Despite talk of an AI bubble and metrics like the cyclically adjusted price-to-earnings ratio (CAPE) and the Buffett indicator (market cap of the Wilshire 5000/GDP) near all-time highs, the S&P 500 is actually quite cheap based on forward-looking metrics. The S&P 500 carries a forward P/E of below 19 times, according to Yardeni Research, while it was at approximately 65 times before the dot-com bubble burst, according to Bloomberg.

At the same time, the S&P 500 is trading at its cheapest PEG (price/earnings-to-growth) ratio in more than 30 years. Based on five-year forward growth estimates, the S&P 500 currently has a PEG of around 0.7, according to Yardeni Research. This is only the fifth time the S&P's PEG has dropped below 1 since at least 1995, and it is significantly below the index's 1.3 average over time.

Meanwhile, the S&P 500's largest constituent, Nvidia, is one of the index's cheapest stocks. The stock makes up roughly 7.5% of the index and trades at a well-below-market multiple with a forward P/E of 13.7 based on analyst estimates for its fiscal 2028 (ending January) and a PEG of 0.33. If Nvidia were to re-rate to a market multiple, the S&P 500 index would likely see some considerable gains from here.

Image source: Getty Images

Time to invest in stocks

Now is not the time to be worried about a potential market crash, in my view. The market is cheap based on forward metrics, and we are entering a historically strong period of time for stocks.

That said, no one can consistently predict when a market pullback will occur, and most past historical patterns don't have large enough sample sizes to be statistically significant. As such, stay invested, as time in the market has proven to build more wealth over the long term than market timing.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Nvidia. The Motley Fool has a disclosure policy.