S&P 500 Forecast for 2025

As the implications of the new Trump tariffs set in, and world leaders react to Wednesday’s imposition of reciprocal tariffs on country’s dependent on US consumers, this week should be a volatile one for the S&P 500.

After a remarkable bull run in 2024, the S&P 500 has given back 14.7% of its gains. Today, it more downtrend and volatility as investors seemed to get caught in a seasaw of propaganda, which Trump silenced with his reaffirmation of his tariff plan.

He noted in his statement that the tariffs are justified and will make America great. And then he announced new 50% tariffs on China after they escalated a 34% hike. See more on today’s breaking news stories.

Technical traders believe S&P stocks are oversold and might be in for a rebound based on their technical tools.  However, Trump’s reciprocal tariffs come into effect this week on Wednesday. And he has just threatened an additional 50% tariffs on China. This is a time where technical forecasts and indicators really aren’t reliable forecasting tools. See more on analysts predictions on the S&P.

S&P Slides into Bear Territory

The S&P’s last bull market appears to be done, and we wait for the Trump-era bull market to begin. A bear market is defined as a 20% decline from a record high on a closing basis. Some have suggested Trump was trying to create a stock market dip or crash, but regardless, the transition to US protectionism is one that’s going to have casualties. it has given back fully, everything it has gained, and is lower than it was one year ago.  This one chart below says a lot about how investors are feeling, but a lot about the buy the bottom other investors such as Warren Buffet will offer.

The chart below courtesy of Google Finance tells us a lot. Those who sold off in February with the tariff effect outlook made wise decisions, while those who hung on, have lost all their gains.

For investors, it’s a waiting game to find the “best near the bottom” US stocks that will weather a potential recession.

Bankers Got it Seriously Wrong

As you’ll see below, bank economists failed badly at predicting the 2024 year end S&P 500 index levels. They reached 6000 and yet are pulling back. Projections based on political leanings is dishonest and has an impact on the lives of investors worldwide.

 

With the S&P 500, Russell 2000, Dow Jones and NASDAQ surging this year, and anticipating the Trump trade bump, forecasts might even get out of control. Yet if President Trump can succeed in repatriating manufacturing, bringing back investment money, lowering regulation and taxes, and getting interest rates lower, why wouldn’t this be a golden era for the stock market. Those investing in Bitcoin certainly see the daylight.

Fundstrat’s Tom Lee, made an outrageous on-the-money call for the S&P last year of 4750.  He predicts it’s going to be quite a ride for the next 5 years, and that the S&P 500 will hit 15,000 by 2030. “This will be the 3rd time that stocks entered a cycle where annual returns compound at high teens” said Tom Lee. Tom suggests this bull market will be driven by the younger generations, particularly millennials and Gen Z, along with AI.

Tom’s still on with his Thanksgiving Day rally, and the year-end Santa Claus rally.  However, there are still 2 months before President Trump assumes the Presidency and the House and Senate come under Republican control. This is a period where the Democrats will try to set traps with spending, and other tactics. Tom has muttered some thoughts about a pullback.

Banker’s Updated S&P Forecasts:

BMO Capital Markets: Brian Belski, chief investment strategist, set a year-end 2025 target of 6,700 for the S&P 500, suggesting a 14% rise from late 2024 levels.
Wells Fargo Investment Institute: expects the S&P 500 to finish next year near 6,600.
Morgan Stanley: Mike Wilson, chief investment officer, announced a 12-month target of 6,500 for the index, implying a nearly 10% increase.
CFRA: Sam Stovall, chief investment strategist, raised his year-end 2025 target for the S&P 500 to 6,585 points, suggesting an 11% increase from current levels.
UBS: Predicts the S&P 500 could reach 6,600 by the end of 2025, representing a 13% increase from current levels.
Goldman Sachs: Forecasts the S&P 500 will hit 6,000 by the end of 2024 and further rise to 6,500 by the end of 2025.

We can accept the bank’s forecasts tongue in cheek, while recognizing that as I’ve said for years, that the stock market forecast is driven by politics. And the election of Donald Trump as President is perhaps the biggest bull market tailwind ever. Investors who understand political influences on business and trade stand a better chance to make good decisions.  The US is in the driver’s seat and able to reduce unfair trade, cut deficits, reduce inflation, and support US companies. That paints a favorable 5 year outlook for US stocks as the economy picks up steadily.

Most experts anticipate continued growth for the S&P 500 in 2025, with targets ranging from 6,500 to 6,700 at year end. This suggests an average expected increase of about 10-14% from current levels. However, analysts also warn of potential increased volatility, from political battles as the Democrats try to trip up the incoming administration. Goldman Sachs projects a 2.5% growth in GDP for the U.S. economy in 2025. Martin Baccardax sees corporate earnings growth, with LSEG data reaching 14.1%.

Number One Factor Driving the S&P: President Trump

With the Trump win in the White House, Senate and House, stock market experts and economists are revising their predictions, and reformulating what the best stocks to buy will be.

Sectors expected to do well in 2025 are: technology, health care and consumer goods. The housing market might be an understated market if President Trump is able to defeat the FED and lower interest rates. The current mood from experts is the FED rate should stay high, due to inflation projections. The US economy is performing well, and with inflation down (reduced government spending), lower energy costs, and the AI-assisted business sector roaring, productivity gains are expected in 2025, and much more so in the next 5 years.

Economic Factors that affect the 2025 S&P 500 forecasts:

1. Strong economic growth: Expectations of continued U.S. economic expansion are supporting positive outlooks
2. Downward Inflation trends: Easing inflation is contributing to improved consumer confidence and market sentiment
3. Federal Reserve policy: Anticipated interest rate cuts in 2025 could boost economic growth and corporate profits
4. Corporate earnings: Projected earnings growth is a significant driver of positive forecasts.
5. Market breadth: Improving market breadth, with broader participation across sectors and company sizes, and into S&P 5000 stocks is expected.
6. Productivity gains: Increased corporate efficiency may lead to higher profit margins, benefiting stock prices.
7. Consumer spending: Stable consumer spending is expected to contribute to economic stability.
8. Sector rotation: A potential shift from technology and mega-cap stocks to broader market participation could impact overall returns
9. Global market trends: International economic conditions and market movements may influence the S&P 500
10. Investor sentiment: Overall optimism among investors, based on economic indicators and corporate performance, is supporting bullish forecasts
11. Political factors: A pro-US administration reducing costly regulations, high taxes, high energy costs, and interest rates means politics will drive the equity markets.

In General What Drives the S&P 500 Stocks?

Novice investors need to gain a more fundamental understanding of the makeup of the S&P 500 index and what moves in the sense of economic factors (other than Trump and political jousting).

1. Macroeconomic Factors

Interest Rates (Federal Reserve Policy):

• Higher rates increase borrowing costs, reducing corporate profits and stock valuations (P/E multiples tend to shrink).
• Lower rates make stocks more attractive compared to bonds.

Inflation:

• Moderate US inflation can be healthy, but high inflation erodes profit margins and consumer spending.
• low inflation
• The Fed may raise rates to combat inflation, negatively impacting stocks.

Economic Growth (GDP):

• Strong US GDP growth boosts corporate earnings, while recessions hurt stock performance.

Employment Data:

• Low unemployment supports consumer spending (~70% of U.S. GDP), benefiting stocks.

Consumer Confidence & Spending:

Higher confidence leads to more spending, driving corporate revenues.

2. Corporate Earnings & Fundamentals

Revenue & Profit Growth:

• Companies with strong earnings growth (e.g., tech giants like Apple, Microsoft) drive the index.

Profit Margins:

• Affected by input costs (e.g., wages, commodities) and pricing power.

Guidance & Analyst Estimates:

• Stocks often move based on future earnings expectations rather than past results.

3. Sector-Specific Trends

Technology (30%+ of S&P 500):

• Influenced by innovation, semiconductor demand, AI adoption, and interest rates (growth stocks are rate-sensitive).

Financials:

• Benefit from higher interest rates (wider net interest margins).

Energy:

• Tied to oil & gas prices (geopolitical risks, OPEC decisions).

Consumer Discretionary vs. Staples:

• Discretionary (e.g., Amazon, Tesla) does well in strong economies; staples (e.g., Procter & Gamble) are defensive.

4. Geopolitical & Global Events

Trade Wars & Tariffs:

• Impact multinational companies (e.g., Apple, Nvidia) reliant on global supply chains.

Political Stability (U.S. & Global):

• Elections, fiscal policies (tax cuts/spending), and regulations affect sectors differently.

Global Conflicts (e.g., Ukraine, Middle East):

• Can disrupt supply chains and commodity prices.

5. Market Sentiment & Technical Factors

Investor Sentiment (Fear vs. Greed):

• Measured by the VIX (Volatility Index)—high fear can lead to sell-offs.

Momentum & Algorithmic Trading:

• Short-term moves driven by technical levels (e.g., 50-day moving average).

Institutional Flows (ETF & Mutual Fund Activity):

• Passive investing (e.g., S&P 500 ETFs) can amplify market moves.

6. Currency & Commodity Movements

U.S. Dollar Strength:

• A stronger dollar hurts multinational earnings (foreign revenue becomes less valuable).

Oil Prices:

• Higher oil prices benefit energy stocks but hurt airlines and consumers.

7. Valuation Metrics

P/E Ratios (Price-to-Earnings):

• High P/E may signal overvaluation if earnings don’t justify prices (e.g., during bubbles).

Fed Model (Earnings Yield vs. Treasury Yields):

• Stocks look less attractive when bond yields rise significantly.

Which S&P Sectors are Performing Well?

S&P Global show consumer discretionaries are picking up sharply, but in 2025, the economy will surge making industrials much more attractive. With lower interest rates and regulations, financials look positive, and AI driven info tech might shine next year too.

See more on signals of stocks to sell, and on the best stock picks of 2025.  Which post pandemic stocks are best and check out the best stocks on the Dow Jones and NASDAQ indexes.

For newbie self-directed investors, you can learn learn more about the S&P below and be introduced to the listed stocks below. You’re looking for the best performing S&P 500 stocks to invest in and you’ll find them here too. In fact, you’ll discover that certain stocks on the S&P 600 are actually outperformers.

The S&P, DOW have shown moderate volatility and similar returns while the NASDAQ has suffered much more ups and downs, which might appeal to day stock traders.   Investors are uncertain right now and are reviewing forecasts and predictions for today, next week, next month and 6 months.

Safe Investing in the S&P 100

Here are the top S&P 100 stocks of the last month. Check them out further on Barchart.com and for more on the S&P 100 forecast.

Top performers on S&P100 (as of May 12, 2023). As might be expected, Microsoft, Meta, Alphabet, Nvidia, General Electric and Bookings Holdings are the strongest of late.

Introducing the S&P 500 Growth Stock

This chart below reveals the S&P growth stocks have been phenomenal the last two months. And as you can see the 3 month to one year price growth has been excellent. Happy investors of Chipotle Mexican Grill, First Solar, Eli Lilly, Monster Beverage, Fair Isaac and Nvidia enjoyed incredible returns over one year.

What is the S&P 500?

What is the S&P index?  The S&P 500 or Standard & Poor’s 500 Index, is a weighted index of the 500 largest U.S. publicly traded companies (large-cap U.S. equities). The index has a 69.0% trailing 1-year total return. It’s a measure of how well the top US corporations are doing. It can be contrasted with the Russell Index which is a measure of small to medium-sized companies. The Russell Index has actually performed well in 2020, and warrants a good look for investing.  Check the Dow forecast and the NASDAQ Forecast too.

Stocks in the S&P 500 include Google Alphabet, Amazon, American Airlines, Facebook, Apple, McDonalds, NASDAQ, Nike, Delta Airlines, Sherwin Williams, Netflix and other high valuation companies. Facebook, Apple, Amazon, Netflix and Google — the FAANG stocks — now make up more than 11% of the S&P 500 index.

See more on forecasts for 2025, and a look at the current stock market status.

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