US economic growth is expected to remain resilient in 2025, with many strategists predicting a strong year for the market. However, experts warn of increased volatility due to uncertainty surrounding Federal Reserve rate cuts and a new Donald Trump administration.
BMO Capital Markets chief investment strategist Brian Belski predicts a normalized return environment with balanced performance across sectors, sizes, and styles in 2025. He sets a 6,700 target for the S&P 500, expecting returns of 9.8%, in line with the index’s average historical gain.
The median year-end target among strategists tracked by Yahoo Finance is 6,600, representing a 12% increase from the current level. However, there are diverging views, with Oppenheimer’s projection at 7,100 and Sitfel’s “mid 5000s” call being the lone downward estimate.
Goldman Sachs chief US equity strategist David Kostin notes that even without the massive outperformance of tech stocks like Apple and Amazon, the market could surge higher. However, the narrowing differential in earnings growth rates may lead to relative returns being more closely aligned across sectors.
Kostin’s colleague, Calvasina, sees economic growth meeting or exceeding positive expectations as crucial for the stock market rally. The strategist notes that annual GDP has grown between 1.1% and 2% five times, resulting in stocks being higher about 70% of the time, with an average return of nearly 11%.
Despite bullish prospects, there are key risks to strategists’ calls, including the potential for a resurgence in inflation. The Federal Reserve projects core inflation to hit 2.5% next year before cooling to 2.2% and 2% in subsequent years.
Stifel chief investment strategist Barry Bannister warns that sticky inflation could lead to higher interest rates, prompting a pullback in the stock market rally, potentially resulting in the S&P 500 ending 2025 in the “mid-5000s.”
Source: https://finance.yahoo.com/news/heres-where-wall-street-sees-stocks-heading-after-the-best-2-year-stretch-since-97-98-211510523.html