JPMorgan raised its year-end S&P 500 target to 8,000 on Monday, and research firm CFRA now sees 8,050. A new stock market risk is forming beneath the cheer, as investors abandon their downside hedges.

Wall Street keeps raising the bar. Almost nobody is paying for protection in case it misses.

JPMorgan and CFRA Raise S&P 500 Targets on AI Earnings

JPMorgan has now raised its call twice in two months. The bank went from 7,600 to 7,800 in June, then to 8,000 this week. The new target sits about 3% above Friday’s close of 7,757.64.

Strategist Dubravko Lakos-Bujas and his team now expect $365 in 2026 earnings per share (EPS). That is 35% growth in a single year. Notably, they left the valuation multiple flat at 20 times earnings. Profits, not a richer price tag, carry the entire upgrade.

The profits case rests on the cloud. Google Cloud grew 82% year over year last quarter, with Microsoft Azure up 43% and Amazon Web Services up 37%. JPMorgan expects artificial intelligence (AI) to soak up more than half of the index’s $1.5 trillion in capital spending this year.

CFRA, an independent Wall Street research firm, went further. It lifted its 12-month target to 8,650 from 7,730 on Monday, roughly 12% above the August 7 close. Its year-end call of 8,050, tops JPMorgan’s.

The crowd is moving the same way. Goldman Sachs sits at 8,000, Citi at 8,100, and the Street average near 7,854. Only Bank of America holds out at 7,100.

The calls follow a week in which the Dow and S&P 500 closed at records on AI earnings.

Nobody Wants to Hedge as FOMO Grips the Options Market

Put options work like crash insurance. Right now, almost nobody wants to pay the premium.

Hedging demand has sunk to lows last seen after President Donald Trump’s tariff retreat in 2025, Bloomberg reported Monday. The gauge is one-month put-to-call skew, which compares the cost of bearish puts against bullish calls. It now sits at a 16-month low.

“Demand for protection against a drop in stocks has fallen to the lowest level since US President Donald Trump’s capitulation on tariffs last year, as indexes rally to record highs,” Bloomberg analysts noted.

The echo matters. Skew was last this cheap in April 2025, just as that tariff selloff ended. Back then, protection stopped selling because the panic had passed. This time, it stopped selling because fear of missing out (FOMO) replaced fear itself.

Valuations flash the same complacency. The S&P 500 dividend yield fell to 1.04%, the lowest ever recorded, Barchart data shows. That is less than half its long-run average near 2.81%.

Michael Burry sees danger in the calm. The investor, famous for calling the 2008 collapse, issued a 1987-style crash warning last week as the index hit records.

Why Vanishing Hedges Could Become the New Stock Market Risk

A market without hedges has no shock absorbers. And the shock list is not short.

Even the bulls admit it. CFRA’s Sam Stovall raised his targets and still warned the rally may be nearing a peak. He points to rising margin debt, sticky inflation, and possible further Federal Reserve tightening.

JPMorgan expects the Fed to hold rates at 3.50% to 3.75% through 2026. It sees core personal consumption expenditures (PCE) inflation, the Fed’s preferred gauge, near 3.4% by December. That leaves little room for rate cuts to rescue stretched prices.

Heavy share and debt issuance plus Strait of Hormuz oil frictions round out the risk list. Weak September seasonality is three weeks away. First comes Wednesday’s US inflation report.

Crypto is watching from a distance. Bitcoin (BTC) traded near $63,955 on Monday, down 2% in a day, while the S&P 500 eased 0.1%.

The bulls’ math works as long as earnings keep beating. If even one flagged risk lands, an uninsured market takes the hit at full force.

Source: BeInCrypto