S&P 500 to gain over 8% by end of next year after strong 2024

NEW YORK – The S&P 500 will rise over 8% between now and end-2025 as US 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 US 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 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, Microsoft and other US heavyweights dominating the race for artificial intelligence technology.

David Kostin, chief US 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 are up about 35% for the year to date, leading gains among S&P 500 sectors, with technology 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.

(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)