Topline
Most major banks call for a third consecutive year of strong returns for the S&P 500, the benchmark stock index tracking 500 of the largest public American companies, offering 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
Bank of America: BofA predicts the mark of the bullish beast, setting a 6,666 target for the S&P by the end of next year. That’s a 10% projected rise from Monday’s 6,050 price for the index. Among the tailwinds cited by the strategists led by Savita Subramanian include macroeconomic factors like lower interest rates and higher labor market productivity as well as a more favorable corporate backdrop with accelerating earnings and a potentially lower tax rate under President-elect Donald Trump. And “the average stock is more attractive than the overall index,” Subramanian said in a Monday call with reporters, explaining the “average stock is actually pretty inexpensive” with the last two years’ rally driving almost entirely by a handful of mega-cap technology stocks.
BMO Capital Markets: The Canada-based firm has a 6,700 price target for the S&P, predicting an 11% 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. “
Deutsche Bank: The German-based bank has a Wall Street high end-of-2025 price target of 7,000 for the S&P. The Binky Chadha-led strategist group calls for about 16% further gains for American equities. “Various aspects” of the economic cycle should support a further advance, including increased capital expenditures outside of big technology, a boost from overseas economic recovery and a likely bump in mergers and acquisitions activity, according to Chadha.
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 up less than 1% over the last four weeks– indicates the market is in a “digestion phase,” Emanuel told Bloomberg recently.
Goldman Sachs: The investment bank predicted in a note to clients the S&P will end next year at 6,500, a 9% gain from Monday. 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 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 10% 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.
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 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 25% below Monday’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 27% year-to-date, the S&P is on track to top 2023’s 23% gain, excluding dividends. 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 58% 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.
