Nomura Research has revised its outlook for the S&P 500 and expects the situation in Iran to subside sooner or later. While a more hawkish Federal Reserve and higher oil prices are short-term headwinds, it explains that the upward trend in stocks could continue over the medium to long term, supported by EPS growth and improving supply-demand conditions.
The weakness in U.S. stocks since March 2026 is attributed to expectations that persistently high oil prices stemming from the situation in Iran, and the resulting inflation concerns, will push the Federal Reserve toward a more hawkish monetary policy. While signs of correction in the S&P 500 have increased and technical indicators have also pointed to weakness, corporate earnings remain resilient, while share buybacks and M&A are expected to continue supporting supply-demand conditions.
The S&P 500's 12-month forward P/E had fallen to 19.1x as of 27 March, placing the market in a high-risk, high-return phase. For medium- to long-term investors, this suggests that buying on dips while staggering purchases over time may be appropriate.
The S&P 500's main scenario calls for levels of 7,300 at end-2026, 7,600 at end-2027 and 7,900 at end-2028, based on the assumptions that the situation in Iran will subside, the economy and corporate earnings will expand, and the Federal Reserve will implement 2 rate cuts in 2026. In response to the current situation in Iran and the lower P/E multiple, the outlooks for June and September 2026 have been lowered slightly, and the lower end of the range has also been adjusted.
As an investment strategy, the focus remains on a barbell strategy combining semiconductors, REITs, small-cap stocks and equal-weighted indices, with the view that combinations offering strong diversification benefits remain effective. In the financial sector, attention is being focused on stocks whose P/E ratios have fallen to around 14x, while oil and gas-related stocks warrant caution depending on the durability of higher oil prices.