Wall Street's 2025 Expectations: Mildly Bullish
In the October 18 edition of Investment Insights, which can be found here, we talked about how markets typically react in year three of a bull market cycle. In summary, gains tend to stay positive, albeit not as strong as the previous two years. For context, the S&P 500 was up 24% in 2023 and is up about 25% YTD here in 2024.With roughly six weeks left in the year, we are starting to see 2025 market projections from Wall Street firms. The general takeaway is: expect continued positive gains, albeit not as strong as the previous two years. Sound familiar?
Morgan Stanley, which entered 2024 with a bearish outlook, is now expecting stocks to rise in 2025, with a year-end S&P 500 price target of 6,500. Morgan Stanley’s Chief Investment Officer Mike Wilson noted, “We expect this broadening in earnings growth to continue as the Fed cuts rates into next year and business cycle indicators continue to improve.”
BMO Capital Markets Chief Investment Strategist Brian Belski issued a 2025 S&P 500 year-end target of 6,700. He wrote, “…we believe 2025 will likely [be] defined by a more normalized return environment with more balanced performance across sectors, sizes and styles.”
Goldman Sachs, which stirred markets last month by forecasting just a 3% annualized return for the S&P 500 over the 10 years, is looking for a 12-month target of 6,500. Goldman stated, “…a friendlier mix of fiscal policy or a more dovish Fed present upside risks.”
How seriously should we take these projections? If recent history is any clue, it should be with a grain of salt. Remember that this time last year, according to Bloomberg, the 2024 median forecast for the S&P 500 was 4,850. We are sitting roughly 1,000 points higher than that as we close out November.How do we feel about the markets heading into 2025? Fairly good. There is a lot of momentum building in the U.S. economy that’s being represented in the equity markets. There has been a meaningful downtrend in inflation, monetary policy is easing, earnings have been strong and the consumer is resilient. Should these trends hold, that’s a positive backdrop for risk assets going into 2025 and possibly beyond.
