After two years of substantial gains, Wall Street expects the stock market to continue growing in 2025, albeit at a slower pace than last year. Most strategists predict double-digit percentage growth for the S&P 500, with analysts expecting an increase of 14.8% in 2025.
The strong economic growth, cooling inflation, and enthusiasm for President-elect Donald Trump’s election victory are expected to boost investor optimism. Tech and AI stocks are forecasted to lead the growth again in 2025. However, some analysts warn of potential downsides, including uncertainty around tariff policy, resurgent inflation, and looming geopolitical tensions.
The S&P 500 ended 2024 with an annual gain of about 23%, marking the first time since 1997 and 1998 that the index has closed with back-to-back gains above 20%. Forecasts from major banks range from growth of around 10% to 14%, which is considered healthy but not as spectacular as last year.
Strong economic growth, corporate earnings, and an incoming business-friendly administration under Trump are expected to drive continued stock market gains. Some analysts see US stocks’ impressive growth as evidence of a new era in tech and AI, with sustainable valuations and strong future earnings growth to support a continued rally.
However, the potential for a volatile policymaking environment during the Trump presidency, the potential for a change in Fed policy, and a market that has encountered precious little resistance could pose problems for stocks in 2025. The Dow has been struggling to regain its momentum after recent losses, and traders expect just an 11% chance of a rate cut in January.
Overall, while Wall Street is bullish on the stock market’s prospects for 2025, there are concerns about potential risks and uncertainties that could impact growth.
Source: https://edition.cnn.com/2025/01/01/investing/what-to-expect-from-stocks-in-2025/index.html