- S&P 500 Forecasts

Stock market prediction: Monthly S&P 500 Forecast

Monthly S&P 500 forecast for June 2026

June 1^st, 2026

Our monthly S&P 500 forecast for June is a 0.05 percent dip over the average of May 2026.

The model-based forecast takes into account the changes in oil prices and wages. However, a forecast model cannot possibly capture the full impact of uncertainty caused by tariff wars and geopolitical tensions, such as the war in Middle East.

S&P 500 forecast June 2026, Aktienprognose Juni 2026 — *Price returns, the historical data from May* 30^th2026

The market rally continued in May

In April, the stock markets rallied on the back of the ceasefire between the US and Iran. The stock market rally gained further momentum in May as US companies reported stellar earnings.

At the end of May, the index was 5.1% higher than at the end of April. Despite the surging inflation, a downward revision to Q1 GDP, and the elusive peace deal with Iran, investors appear to remain optimistic about the stock market.

The US economy remains resilient. The positive impulse from Trump’s ‘One Big Beautiful Bill Act’ (OBBBA) became effective as of May 2026. The bill is to boost consumer incomes and short-term corporate earnings with favourable tax reliefs. Furthermore, consumer spending is currently strong as households use their savings to bring forward future purchases to beat any tariff-induced price increases. US companies are currently running efficient supply chains with stronger consumer demand. The stronger PMI data support this hypothesis.

The AI infrastructure boom has become more broad-based lately, lifting the shares of not only the ‘Magnificent 7’ companies, but also tech hardware companies such as Dell and electricity companies in the Utilities sector. The projection of capital spending on AI infrastructure is $750 billion in 2026. The scale of the investment boosts the growth prospects of the US economy.

Although the S&P index remains overvalued by historical standards, the earnings potential of the AI-fuelled boom is not easy to judge by the historical trajectory of company earnings. This explains why investors do not seem to be fazed by high forward P/E ratios.

PMI improves, and consumer confidence is mainly stable

The Chicago Purchasing Managers’ Index (PMI) climbed to 62.7 in May from 49.20 in April. The index averaged 54.25 between 1967 and 2026. The contraction in business activity has been a theme over the last two years. The latest data turnaround is especially significant in the face of rising energy and material prices caused by the war in Iran.

The Conference Board’s consumer confidence index edged down by 0.7 points to 93.1 (1985=100) in May, from 93.8 in April’s upwardly revised reading. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—retreated by 3.2 points to 121.2. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—rose by 1 point to 74.4. The survey period for this month’s preliminary results was May 1-19, and presumably was positively affected by the recovery in the stock markets.

Although consumers’ confidence in May was not significantly different from that in April, any positive sentiment may be dampened if the impact of higher oil prices becomes more pronounced as rising consumer prices in the coming months.

Inflation increases further, and Q1 GDP growth is revised down

The annual inflation rate in the US spiked to 3.8% in April from 2.3% in March 2026, slightly above the market expectation of 3.7%. This was the highest rate since May 2023. Increasing energy and materials prices were the main drivers of the higher inflation rate.

The personal consumption expenditures (PCE) index, a key barometer of inflation and consumer spending, rose at a 3.8% annual pace in April, in line with the market consensus.

Core PCE, which excludes the more volatile food and energy categories, grew 3.3% in April, up from 3.2% in March, also in line with market forecasts.

Brent crude price currently hovers below the 100-dollar-a-barrel mark, with the expectation of approaching peace in Iran. It remains to be seen how fast the inflation rate will cool down once the war ends.

The second estimate for 2026 Q1 GDP growth was revised down to 1.6% from the advance estimate of 2%, caused by downward revisions to consumer spending and investment. (Source: Bureau of Economic Analysis (BEA)). Economists polled by Reuters had forecast GDP growth increasing at a 2.0%.

No rate cut is expected in June

After the 25 bp rate cut in December 2025, the Fed’s target range for interest rates is 3.50% to 3.75%. As expected, the Fed kept the U.S. short-term interest rates unchanged in its January, March, and April meetings.

As a result of the war with Iran, inflation is hot again, and the 6% increase in the PPI is particularly worrying for the near-future inflation prospects.

As Kevin Warsh became the new Fed Chairman, he will be heading the next Fed meeting on June 16–17. Under the circumstances of high inflation and a resilient economy, we believe it is unlikely that the Fed would cut the interest rates before December and even next year. A hawkish monetary policy stance would even demand a rate increase. This would indeed be justified as the Fed’s slow post-pandemic policy actions were blamed for a prolonged period of elevated prices.

S&P 500 index is slightly overvalued

According to Factset Insights from May 29, the forward 12-month P/E ratio for the S&P 500 is 21.2. This P/E ratio is above the 5-year average (19.9) and above the 10-year average (18.9). FactSet reports that the blended (year-over-year) earnings growth rate for the S&P 500 is 28.6%. If 28.6% is the actual growth rate for the quarter, it will mark the highest earnings growth rate reported by the index since Q4 2021 (32.0%).

The latest forward 12-month P/E ratio is above the P/E values from the previous month (19.9). That said, the recent strong company earnings have reduced the extent of overvaluation. Our monthly S&P 500 forecast for June indicates a 0.05% dip over the average of May. We expect the forward P/E value to be fairly valued in April.

Our monthly S&P 500 forecast is a model-based fair-value estimate. Announcements of tariffs and cancellations cannot be captured in our model unless the impact appears in historical data. The possible impact of geopolitical tensions is fed into the model through keyword searches (Google clicks) and the advanced retail sales index. However, these variables perform better in normal times. Our quarterly S&P 500 forecast discusses these issues in more detail.

Stock market prediction: Quarterly S&P 500 Forecast

2026 Q2- 2026 Q3

June 1^st 2026

Our quarterly S&P 500 forecast for 2026 Q2 (average price returns) is a 6.3 percent growth over the first quarter of 2026. We forecast 2.8% growth for Q3 over the average of Q2. Our monthly forecast for June is only slightly lower than May’s average.

Volatility concerning frequent changes in tariff rates and timings, and geopolitical conflicts, cannot be captured in a forecast model. Thus, any uncertainty concerning these issues makes the 95 % confidence interval around the point forecast rather wide.

S&P 500 2026 Q3 forecast — Source: Historical data from FRED (price returns) and the forecast are our own estimations based on the data from May 30^th 2026

About us

This blog presents the S&P 500 forecasts based on fundamental econometric models and historical economic and financial data.

Our blog refers to a quote attributed to Mark Twain, with the conviction that a thorough study of the past data throws some light into the future, as long as one is aware of the caveats that the future is not an exact replica of past events. Thus, our mission is to detect the ‘rhyming’ signals by fitting the best model to the historical data, bearing in mind that the future never plays out exactly the same; there are forecast risks associated with ‘’known unknowns” and “unknown unknowns”.

Our data is based on official sources, and not third-party data providers. Our facts are regularly checked for inconsistencies.

Thinking outside the black box of machine learning

In contrast to the various websites that present the forecasts of hundreds of financial instruments ranging from stock market indices to crypto-currencies (e.g. tradingeconomics), our forecasts are focused on a few instruments and are labor-intensive. Our forecasts are the product of meticulous analysis of the data, composed of carefully chosen economic indicators based on theory and expert knowledge. Furthermore, our forecasts entail vigorous analysis via sophisticated econometric methods that have been back-tested and cross-validated. We ensure that the coefficient signs of the explanatory variables are in line with our economic intuition.

Our empirical findings are not an output of a black-box optimization process. Having said this, we also test the explanatory power of all the chosen economic indicators using machine-learning algorithms. We use algorithms such as Deep-learning, Logit, Random-Forest classifiers, K-nearest Neighbor, XGBoost, Extra Trees Classifier, and Support Vector Machine, to ensure that the choice of the indicators sufficiently discriminates the positive growth from negative growth signals in the forecast variables.

Our keyword algorithm predicts the US consumer sentiment

The S&P 500 predictions involve multi-equation models where some of the endogenous explanatory variables such as corporate profits and advance retail sales are themselves forecast using our proprietary models. Our models employ a totally original set of ‘keyword-based indicators. To the best of our knowledge, these indicators have never been used before. These indicators seem to capture the fluctuations in consumer tendencies rather well. Our models adjust all these indicators for seasonal variations. Thus, any changes in consumer tendencies due to various seasonal factors are taken into account.

The model outputs shown in this blog are point forecasts computed on the date shown in the graphs. They should be viewed as positive or negative signals for the direction where the markets are headed. The confidence intervals with regard to the accuracy of the forecasts refer to a wider range of possible outcomes. Depending on various irregular events/news, the actual outcome can be closer to the lower or upper confidence bound.