S&P 500 to end 2025 up 9% from here, but Trump-related uncertainties mount

NEW YORK – The S&P 500 will finish 2025 up about 9% from now, but volatility will likely increase as a barrage of tariff announcements, job cuts and policy changes from President Donald Trump fuels uncertainty, according to equity strategists in a Reuters poll.

The year-end target of 6,500 for the benchmark S&P 500, the median forecast of 54 equity strategists, analysts, brokers, and portfolio managers collected February 13-25 is unchanged from a Reuters equity poll in November.

That is 9% above Tuesday’s close of 5,955.25.

The index is up 1.3% so far in 2025 following two straight years of gains exceeding 20%, helped largely by gains in megacap tech companies like Nvidia dominating the race for artificial intelligence technology.

Strategists said they expect solid corporate earnings growth to continue to support gains in equities and they see a possible boost to the economy if Trump, who took office on January 20, goes ahead with his pro-growth agenda for tax cuts and deregulation.

But they say tariffs threaten to add inflationary pressures at a time when the Federal Reserve has paused its rate-cutting cycle.

“The economy is growing, inflation has been sticky but it’s much lower than it was just six months or a year ago, and corporate profits are growing,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan, which has a 6,500 “base case” year-end forecast for the S&P 500.

“What could derail some of that are the tariffs. That, to us, is the biggest known unknown for markets and investors,” he said, noting that for now investors may be viewing the tariff announcements as “a negotiating tactic.”

Trump has rolled out a new 10% levy on all Chinese imports and announced tariffs on global steel and aluminum imports.

He said on Monday his proposed tariffs on Mexico and Canada were still set to start next week, and has said he plans to introduce 25% tariffs on autos, semiconductors, and pharmaceutical imports.

More recently, worries about a slowdown have emerged. Data on Tuesday showed US consumer confidence deteriorated at its sharpest pace in 3-1/2 years in February while 12-month inflation expectations jumped.

Also, thousands of US government workers have been fired in recent weeks as part of Trump’s plan to reduce the federal workforce, although those losses have mostly not appeared yet in formal measures of the US job market.

The cuts are being carried out under the direction of Tesla Chief Executive Elon Musk’s Department of Government Efficiency.

Moreover, Trump has verbally supported Russia as he has pushed for a deal to end Russia’s conflict with Ukraine, and has denounced the Ukrainian president as a dictator, creating alarm among some investors about relations between the US and the rest of the world.

When asked whether a stock market correction of at least 10% is likely in the coming three months, 13 of 19 poll participants who answered the question said it was likely or highly likely, while six said it was unlikely.

“Those with a short-term horizon, they could be a little rattled by volatility. We just have so many unknowns as we start 2025,” said Kristina Hooper, chief global market strategist at Invesco in New York. She expects the S&P 500 to end this year at 6,360.

Still, she said, “policies are probably going to be less important than what’s fundamentally happening”, such as with earnings.

Analysts expect S&P 500 earnings growth of 11.1% in 2025, compared with 11.7% in 2024, with growth for the final quarter of 2024 set to be the highest since 2021, according to LSEG.

Even after a choppy start to 2025, the S&P 500 is trading at a multiple of about 22 times forward earnings, compared with a 10-year average price-to-earnings ratio of about 18, based on LSEG data.

Strategists continued to cite financials as among their top sector picks for 2025, partly because of prospects for deregulation under Trump.

The poll has the Dow Jones industrial average finishing this year at 47,024, up from 46,600 in the Reuters November poll. The index closed at 43,621.16 on Tuesday.

(Reporting by Caroline Valetkevitch; additional reporting by Chuck Mikolajczak, Stephen Culp, Sinead Carew, Noel Randewich, Chibuike Oguh, and Alden Bentley; Polling by Sarupya Ganguly and Jaiganesh Mahesh; Editing by William Maclean)