Jamie Spencer
U.S. stocks are experiencing one of their strongest post-election rallies in decades, propelling the S&P 500 and other major benchmarks to record highs. Analysts now predict even more gains for the coming years, fueled by favorable economic and political conditions.
Record-Breaking Gains for 2024
The S&P 500 has surged approximately 27% year-to-date, with a 20% rebound from its August lows caused by volatility linked to the Japanese yen. Since the November election, the index has climbed 5.15%, surpassing the 6,000-point mark, well above Wall Street’s early 2024 projections.
Charlie Bilello, chief market strategist at Creative Planning, notes that the index’s current level is 680 points higher than the highest Wall Street target for 2024 and 25% above the average estimate of 4,861 points.
S&P 500 Forecasts Reset for 2025
Analysts are now revising their 2025 predictions, with Wells Fargo’s Christopher Harvey offering one of the boldest forecasts. Inspired by James Bond’s “007” moniker, Harvey has set his S&P 500 target at 7,007 points by the end of 2025, reflecting confidence in continued market growth.
Harvey attributes this optimism to:
- A business-friendly White House and Republican-led Congress.
- A dovish Federal Reserve reducing interest rates gradually.
- A resilient U.S. economy maintaining strong growth.
“On balance, we expect the Trump administration to usher in a macro environment that is increasingly favorable for stocks at a time when the Fed will be slowly reducing rates,” Harvey said.
Earnings Growth and Economic Strength
Harvey projects S&P 500 earnings to rise to $274 per share in 2025, up from $270, with a further increase to $318.50 by early 2026. LSEG data forecasts 2025 profits growing by 14.3%, following a 10.2% advance this year, with a year-end earnings total exceeding $275 per share.
This earnings growth aligns with a stronger-than-expected domestic economy. The Atlanta Fed’s GDPNow tool estimates the economy is growing at a 3.2% annualized rate, supporting market optimism.
Federal Reserve Policy Supports Stocks
Federal Reserve Chair Jerome Powell highlighted the economy’s robust health at the New York Times DealBook event, stating, “The U.S. economy is in very good shape and there’s no reason for that not to continue.”
While Powell’s comments may dampen expectations for aggressive Fed rate cuts, they are unlikely to derail the current bullish momentum in equity markets.
A Favorable Backdrop for Stocks
Harvey and his team anticipate a slight late-2025 boost from increased mergers and acquisitions (M&A) activity, contributing to sustained market growth. Despite concerns about potential inflation from Trump’s import tariffs, Harvey sees little risk of significant disruptions to the positive market environment.
The Road Ahead
As U.S. stocks continue to rally, analysts remain optimistic about the potential for further gains in 2025 and beyond. With supportive economic policies, strong earnings growth, and a healthy domestic economy, the stage is set for a prolonged bull market.
