S&P 500 to gain over 8% by end of next year after strong 2024
By Caroline Valetkevitch
NEW YORK, Nov 26 (Reuters) -The S&P 500 will rise over 8% between now and end-2025 as U.S. interest rate cuts and potentially less regulation under President-elect Donald Trump extend the market's strong run, according to a Reuters poll of equity strategists.
Continued U.S. economic health will boost earnings growth, and some strategists cited financials as among their top sector picks going into 2025, partly because of prospects for deregulation under Trump.
Some market participants expect Trump's agenda of tax cuts and deregulation will propel economic growth and further gains in the market.
The benchmark S&P 500 .SPX will end 2025 at 6,500 points, according to the median forecast of 48 equity strategists, analysts, brokers and portfolio managers collected Nov. 15-26. That's up about 8.5% from its 5,987.37 close on Monday.
The latest end-2025 forecast is sharply higher than the 5,900 forecast in a Reuters poll in August.
Stocks rallied to record highs following the Nov. 5 presidential election which Republican Trump won, four years after being voted out of the White House.
Overall, the S&P 500 has surged about 26% so far in 2024, fueled in part by sharp gains in Nvidia NVDA.O, Microsoft MSFT.O and other U.S. heavyweights dominating the race for artificial intelligence technology.
David Kostin, chief U.S. equity strategist at Goldman Sachs, forecast in his recent 2025 equity outlook that the "Magnificent 7" group of high-performing stocks - which include Nvidia and Microsoft - are likely to outperform next year but "by a much smaller magnitude."
He sees higher earnings growth overall for the S&P 500 pushing the index to 6,500 by the end of next year.
Analysts expect earnings growth of 14.2% in 2025 for the entire S&P 500, up from 10.2% this year, according to LSEG.
Following this year's rally, the S&P 500 is trading at 22.6 times expected earnings, compared with a 10-year average of about 18, according to LSEG.
"We're not concerned about valuations" because of the expected growth in earnings and the economy, Mary Ann Bartels, chief investment strategist at Sanctuary Wealth said.
Also, she said, the Trump administration may be positive for business.
Worries remain over a potential inflationary rebound, which would change how much the Federal Reserve is able to keep cutting rates.
The Fed embarked on its policy easing cycle with a large half-percentage-point rate cut in September, its first reduction in borrowing costs since 2020.
Some of Trump's plans, especially those for higher tariffs, could drive up consumer prices. On Monday, Trump, who takes office on Jan. 20, pledged big tariffs on the United States' three largest trading partners - Canada, Mexico and China.
Turmoil in the Middle East is also still a concern for investors.
When asked whether a stock market correction of at least 10% is likely early next year, eight of 17 poll participants who answered an additional question said it is likely and two said it is highly likely. Six said it was unlikely and one said highly unlikely.
Among sectors, financials .SPSY are up about 35% for the year to date, leading gains among S&P 500 sectors, with technology .SPLRCT up 33%.
Bank stocks have benefited in part from prospects for increased merger activity.
Deutsche Bank strategists wrote in an outlook report this week they remain overweight financials "where a multitude of tailwinds are converging."
The poll has the Dow Jones industrial average .DJI finishing next year at 46,600. The index closed at 44,736.57 on Monday.
(Other stories from the Reuters Q4 global stock markets poll package)
S&P 500's forward PE hits highest since 2021 https://tmsnrt.rs/495ntYK
S&P 500 components so far in 2024 https://tmsnrt.rs/4eONgWu
Reporting by Caroline Valetkevitch; additional reporting by Chuck Mikolajczak, Stephen Culp, Sinead Carew, Chibuike Oguh, Alden Bentley and Noel Randewich; additional polling by Jaiganesh Mahesh and Rahul Trivedi; Editing by Bernadette Baum
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
