London‑based research firm Panmure Liberum issued a stark outlook on Wednesday, forecasting that the benchmark S&P 500 will retreat to the 5,000‑point mark by the end of 2027. The projection represents a decline of over 35% from the index’s current close of 7,722.72.
Why the downgrade?
Joachim Klement, a research analyst at Panmure Liberum, said the firm’s outlook is driven by “higher bond yields and interest rates,” which could accelerate the end of the equity bull market that began in October 2022. He added that while earnings growth remains strong and economic data appear resilient, the upcoming third‑quarter earnings season and companies’ 2027 outlooks, due early next year, will be a crucial test of whether that strength can be sustained.
Contrasting forecasts
Panmure’s bearish view stands in sharp contrast to several other brokerages that expect the S&P 500 to finish 2026 at or above 8,000 and anticipate the bull market extending into next year. The British brokerage also forecast a decline for Europe’s STOXX 600 to 430 points and the UK’s FTSE 100 to 8,260 by the end of next year, both well below current levels.
Current market backdrop
Despite the gloomy long‑term outlook, the S&P 500 has posted a solid 12.8% gain so far in 2026, underscoring the market’s resilience amid a series of headwinds. Investors have faced stubborn inflation, rising bond yields, higher interest rates, and a cooling of some of the optimism surrounding the artificial‑intelligence boom.
Further challenges could arise if the Federal Reserve and the Bank of England continue to raise rates. Both central banks recently increased policy rates in an effort to keep inflation in check as energy costs rise and the economy remains resilient.
What investors should watch
Market participants are advised to monitor the upcoming earnings season closely, as corporate profit reports will provide clearer signals on whether earnings momentum can offset the pressure from higher financing costs. In addition, any additional rate hikes by the Fed or the Bank of England could hasten the end of the current equity bull market, according to Klement.
While Panmure Liberum’s forecast is decidedly cautious, the broader market narrative remains mixed. The index’s year‑to‑date performance shows that investors have not yet abandoned confidence in equities, but the firm’s warning serves as a reminder that the environment could shift rapidly if monetary policy remains tight.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
