Topline
Top strategists largely expect another year of strong returns for the U.S.’ leading S&P 500 stock index in 2025, according to early prognostications from major banks, a welcome bullish signal for investors already enjoying a historic bull market.
Can the stock market replicate the 20%-plus gains hit each of the next two years?
Key Facts
Goldman Sachs: The investment bank predicted in a Monday note to clients the S&P will end next year at 6,500, a 10% gain from the index’s roughly 5,900 level Wednesday, not accounting for dividends. It’s a view “predicated on continued U.S. economic expansion” and bolstered by the forecasted 11% earnings per share growth for the 500-company index. Notably, the Goldman group led by David Kostin predicts 2025 will be the slimmest relative outperformance of the “magnificent seven” stocks of the U.S.’ seven largest companies since 2017, reversing a trend of extended market-beating returns from the group led by AI leader Nvidia and iPhone maker Apple.
Morgan Stanley: The Goldman rival has a matching 6,500 12-month price target for the S&P, the group led by Michael Wilson shared in a Monday note. Morgan Stanley has a balmier 13% EPS growth forecast than Goldman, but shared the potential for “wider than normal” risks to its forecast due to “the potential uncertainty that the recent election outcome introduces.” Wilson set a bull case target of 7,400 for the S&P, implying a potential 26% advance, and a 4,600 bear case target, indicating a possible 28% correction.
UBS: UBS Global Wealth Management has a 6,600 target for the S&P by the end of 2025, indicating a slightly more bullish 12% gain. The election “likely pulled forward the timing” of the returns associated with optimism from President-elect Donald Trump’s return to the White House in January, wrote Jason Draho, the group’s head of asset allocation, Americas, wrote to clients last week.
BMO Capital Markets: The Canada-based firm has a 6,700 price target for the S&P, predicting a 14% gain. “Earnings growth is actually understated” and “the train has left the station” with the prospect of further gains as the Federal Reserve further lowers interest rates, BMO’s chief investment strategist Brian Belski told CNBC on Monday.
Evercore ISI: The tech-focused boutique bank set a 6,600 target for the S&P by the middle of 2025 following the election. The bull market is “still an infant,” wrote strategists led by Julian Emanuel. Yet the recent stalling of the post-election stock rally – the S&P is down 2% from last Monday’s record close – indicates the market is in a “digestion phase,” Emanuel told Bloomberg on Wednesday.
Yardeni Research: The influential independent research firm led by has a balmy 7,000 target by the end of next year, implying a 19% gain. “Trump 2.0 represents a major regime change that’s bullish for the economy and stocks,” Yardeni wrote last week.
Crucial Quote
This is the “highest concentration market in 100 years,” Kostin said in a Wednesday conference call with reporters. “But you look out longer term…the history of a high concentration market is it doesn’t persist. It eventually fades. You get a broadening of the market.”
Contra
No surprise considering the often unpredictable nature of financial markets, price targets even from the most trusted names on Wall Street can prove imperfect. Last November, Goldman and Morgan Stanley projected the S&P to end 2024 at 4,700 and 4,500, respectively, both more than 20% below Wednesday’s price.
Big Number
10,000. That’s where the bullish Yardeni predicts the S&P could climb to 10,000 by the end of 2029, forecasting a strong 16% annualized return.
Key Background
Up 23% year-to-date, the S&P is on track to nearly match 2023’s 23% gain. This would be the first time the index rose at least 20% in consecutive years since 1995 to 1998 during the internet boom. The S&P’s 53% gain dating back to the end of 2022 has it on pace for its best two-year gain since the late 1990s. Driving much of the S&P’s recent success, which came in the face of a historically challenging high-rate environment, were big technology stocks, with the likes of Amazon, Meta, Nvidia and Tesla all gaining more than 150% since the end of 2022.
Further Reading
ForbesWall Street Looks Forward To Less Regulation And Higher ProfitsBy Hank Tucker
