Panmure Liberum predicts sharp S&P 500 drop by 2027

Panmure Liberum has forecast that the S&P 500 will drop to 5,000 points by the end of 2027, signaling a potential end to the equity bull market sooner than many investors anticipate. The British brokerage warns that despite the S&P 500's resilience, gaining 12.8% this year, the market faces significant headwinds, including stubborn inflation, rising bond yields, higher interest rates, and cooling optimism around the AI boom.

Joachim Klement, a research analyst at Panmure Liberum, cautioned that if bond yields and interest rates continue to rise, the equity bull market may end sooner than expected. He noted that while strong earnings growth and resilient economic data currently support equities, the upcoming third-quarter earnings season and companies' 2027 outlooks will be crucial in determining if this strength can be sustained.

Panmure’s forecast contrasts sharply with other brokerages, which predict the S&P 500 will end 2026 at or above 8,000 points. The brokerage also expects Europe’s STOXX 600 to fall to 430 points and the UK’s FTSE 100 to 8,260 by the end of next year, both below their current levels. Klement added that further interest-rate hikes by the Federal Reserve and the Bank of England could hasten the end of the current equity bull market.

Last month, major central banks, including the Fed and the European Central Bank, raised rates to combat inflation amid rising energy costs and a resilient economy.