Let the good times roll. That's the mantra for many investors as the new year begins. The S&P 500 (^GSPC 0.63%) jumped 23% in 2024 after soaring 24% in 2023. Another gain of 20% or more this year would be fantastic.
How will the stock market perform in 2025? Here's what Wall Street thinks.
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Birds of a feather
Several Wall Street analysts have similar ideas about how the S&P 500 will fare this year. The consensus is that investors can look forward to another year of solid returns, albeit not at the same level enjoyed over the past two years.
UBS and RBC Capital Markets both set a price target for the S&P 500 at 6,600. This reflects an upside potential of around 11.5%. UBS chief investment officer Mark Haefele recently wrote, "The upside scenario would see lower taxes, deregulation, and trade deals adding to a positive market narrative build on solid growth and continued investment in artificial intelligence."
Bank of America is on the same page. Its analysts predict the S&P 500 will rise 12.6% to end 2025 at 6,666. Savita Subramanian, BofA's head of U.S. equity strategy, expects U.S. cyclical stocks to especially perform well.
BMO Capital Markets forecasts the S&P 500 will reach 6,700, reflecting a gain of 13.2%. Chief investment strategist Brian Belski said he and his team "remain resolutely bullish," but expect "performance and fundamentals will more closely match the historical norms -- namely, in the high-single digit/low-double-digit percentage range in 2025."
Evercore ISI has a similar take that's slightly more bullish. Senior managing director Julian Emanuel expects the S&P 500 to jump almost 15% and hit 6,800 by year-end. However, he thinks a pullback in early 2025 is possible.
More optimistic and more pessimistic views
There appears to be a distinct herding trend on Wall Street, with S&P 500 price targets clustering around a narrow range. But some analysts are more optimistic than others, while some are more pessimistic.
For example, Citi, Goldman Sachs, J.P. Morgan, and Morgan Stanley all forecast the S&P 500 will rise nearly 10% this year to 6,500, a little below other outlooks. However, Citi thinks the momentum will extend beyond 2025 and continue into 2026.
On the other hand, several analysts are decidedly more upbeat. Deutsche Bank chief global strategist Binky Chadha predicts the S&P 500 will jump over 18% to 7,000 in 2025. He looks for sustained U.S. economic growth and relatively low unemployment rates.
Oppenheimer is even more bullish. The investment bank anticipates that the S&P 500 will end 2025 at 7,100 -- up roughly 20% from the current level.
Take these projections with a grain of salt
So can investors bank on another good year for the stock market? Not so fast. It's best to take Wall Street's projections with a grain of salt.
Several analysts hedge at least somewhat with their outlooks for 2025. UBS' Haefele stated, "The risk scenario is that trade tariffs, excessive fiscal deficits, and geopolitical strife will contribute to higher inflation, weaker growth, and market volatility."
While RBC Capital Markets' base outlook predicted a solid gain for the S&P 500 this year, the company also evaluated risks to its projections. Lori Calvasina, head of U.S. equity strategy, noted, "In our bear scenario, estimate that the S&P 500 could end 2025 at roughly 5,775 [nearly 2.5% below the current level]. We think it's a reasonable way to think about downside risks if some of investors' worst fears become a reality."
Bank of America also acknowledged that its forecast could be overly optimistic. Head of global research Candace Browning said last month, "[A]s we head into 2025, policy uncertainty has increased substantially. Many of the expected policy shifts should be positive for US equities, but a lot depends on their timing and how the rest of the world responds."
If Wall Street is right, the good times will keep rolling in 2025. If not, investors could have great buying opportunities that set them up for future gains. Whatever the new year holds, it should be a win-win scenario for long-term investors.
