Will 2025 Bring Similar Cheer For S&P 500? Here’s What Wall Street Expects

Wall Street is buzzing with optimism as strategists from major financial institutions predict another year of strong returns for the S&P 500 stock index in 2025. This buoyant outlook comes as a welcome signal for investors riding the wave of a historic bull market. With forecasts leaning heavily towards growth, many investors are keenly looking towards 2025.

Goldman Sachs’ Forecast

Goldman Sachs is one of the first to share its perspective, projecting that the S&P 500 will end 2025 at 6,500, suggesting a substantial 10% gain from the index’s current level of approximately 5,900, not accounting for dividends. This positive outlook is based on the expectation of continued economic expansion in the United States and is further supported by a forecasted 11% growth in earnings per share for the 500-company index. Interestingly, Goldman also notes that 2025 is likely to witness a smaller outperformance from the “magnificent seven” tech stocks—comprised of giants like Nvidia and Apple—compared to past years, hinting at a potential shift in the market dynamics.

Morgan Stanley’s Approach

In a similar vein, Morgan Stanley has set its price target for the S&P 500 at 6,500 as well. They offer a more optimistic earnings per share growth expectation of 13%. However, strategist Michael Wilson cautions that there might be more significant risks to this forecast due to uncertainties introduced by recent election outcomes. Wilson outlines a bull case target reaching 7,400, implying a notable 26% advance, but also presents a bear case target of 4,600, reflecting a potential 28% correction.

UBS and BMO’s Predictions

UBS Global Wealth Management provides a slightly more bullish stance with a target of 6,600 for the S&P 500 by the end of 2025, indicating a 12% gain. Jason Draho, head of asset allocation in the Americas at UBS, notes that the election results may have accelerated returns due to optimism surrounding President-elect Donald Trump’s return to the White House.

Similarly, BMO Capital Markets has set a target of 6,700 for the index. They argue that earnings growth could be understated, and that current market conditions signal that “the train has left the station” as the Federal Reserve appears poised to lower interest rates further. Brian Belski, the chief investment strategist at BMO, is particularly optimistic about the potential for future gains.

Evercore ISI and Yardeni Research Views

Evercore ISI also follows suit with an anticipated target of 6,600 by mid-2025. Their strategists suggest that the current bull market, while young, shows signs of a “digestion phase” after the recent post-election stock rally—evidenced by a 2% decline from the S&P’s last record close.

Yardeni Research is taking an even bolder stance, with projections pointing towards a target of 7,000 by the end of 2025, which would represent a 19% gain. They posit that the next phase of Trump’s presidency signifies a “major regime change,” and that the current economic and market conditions are muted towards bullish growth.

Key Insights from Analysts

David Kostin from Goldman Sachs highlighted the unusual concentration within the market, noting that we are witnessing the “highest concentration market in 100 years.” He expresses caution about the long-term prospects of such high concentrations, suggesting that historically, these conditions tend to fade as the market broadens over time.

Looking Back at Previous Projections

With the inherently unpredictable nature of financial markets, it’s vital to remember that price targets from even the most reputable names can miss the mark. Last November, both Goldman Sachs and Morgan Stanley provided targets of 4,700 and 4,500 for the S&P to end 2024, suggesting differences of over 20% from current levels.

Notable Market Performance

Year-to-date, the S&P 500 is up 23%, matching its gain from 2023 and marking consecutive annual increases of at least 20% for the first time in nearly three decades. With a cumulative 53% growth since the end of 2022, this period could culminate in the best two-year performance of the index since the late 1990s. This substantial rise is largely attributed to the tech sector, which features key players like Amazon, Meta, Nvidia, and Tesla, all experiencing gains exceeding 150% since early 2022.

As we gear up for 2025, investors and analysts alike are setting their sights on the S&P 500, awaiting to see whether the trends outlined by Wall Street will hold true in the coming year.