Citi is maintaining its year-end S&P 500 price target of 7,700 while flagging a growing list of risks that could upset the soft-landing scenario underpinning that call, according to a new research note.

The bank’s base case rests on $320 in S&P 500 index earnings for 2026 — a figure that appeared aggressive at the start of the year but has since become conservative, Citi strategists wrote.

Bottom-up consensus now stands at $321.3, following a Q4 reporting season that delivered a healthy positive surprise and lifted full-year 2025 earnings to approximately $276.

Citi’s bull case stands at 8,300, incorporating more aggressive earnings growth and slightly higher valuations, while the bear case of 5,700 accounts for fundamental disappointment and multiple compression.

The Middle East war marks the most immediate concern. “The Iran conflict is the latest in a series of challenges to this view,” strategists led by Scott Chronert wrote, noting that higher-for-longer oil prices bring risk to aggregate consumption and may offset other policy and fiscal stimulus benefits.

They also cited AI disruption risk, private credit concerns, and ongoing tariff uncertainty as threats to the “goldilocks” macro backdrop.

Still, the earnings picture remains supportive. Information Technology stands out, with 2026 estimates revised up more than 11% since the start of the year.

The so-called Elite 8 mega-cap names continue to drive the bulk of S&P 500 earnings revisions, though the strategists note that the rest of the index is beginning to contribute more meaningfully.

The “other 492” companies are expected to deliver low-double-digit earnings growth in 2026 after emerging from an earnings recession in 2024.

Market breadth has also shifted. Year-to-date through late March, the Elite 8 are down roughly 10% while the rest of the index has eked out a small gain, a reversal from 2025 when the mega-caps returned around 25% compared with 14% for the broader market.

Small and mid-cap indices have fared relatively well, up more than 3% and 4%, respectively.

On the macro front, Citi economists expect the Federal Reserve to cut rates three times by 25 basis points between June and September, bringing the policy rate to the 2.75–3.0% range by year-end, with GDP growth modestly accelerating year-over-year before dissipating in the second half.

Sentiment-wise, Citi’s Levkovich Index has moved to the high end of neutral.