Here's what Wall Street expects for the stock market in 2025 after 2 straight years of big gains
A soft finish to 2024 still left stocks with a second straight stellar year. The S&P 500 logged a 23.3% gain, which follows a 24% rise in 2023. The combined gains of more than 53% was the largest two-year percentage jump for the index since year-end 1998, according to Dow Jones Market Data.
Wall Street for the most part is looking for a third straight gain, though at a slightly cooler pace. As MarketWatch’s Isabel Wang wrote on Dec. 19, investment banks and research firms surveyed by MarketWatch put the median target for the S&P 500 at 6,600 by the end of 2025, implying an advance of 12.2% from its finish at 5,881.63 on Dec. 31.
Needless to say, back-to-back rallies have some investors wary of a rare three-in-a-row streak. “For investors, there’s little room for error with valuations this high and since valuations are now driving markets just as much as earnings growth,” wrote Michael Cembalest, chairman of market and investment strategy for JP Morgan Asset & Wealth Management, as highlighted in Thursday’s Need to Know column.
Meanwhile, one of Wall Street’s biggest bulls, Ed Yardeni of Yardeni Research, reiterated Thursday his call for the S&P 500 to rally to 7,000, though he cautioned that investors could face a bumpy ride in early 2025.
“Three consecutive years of double-digit gains don’t happen too often. Nevertheless, that’s what we are expecting: We see the S&P 500 increasing 19.0% this year to 7000,” he said in a note. “However, we think it could be a bumpier ascent than in recent years, especially during the next couple of months. Fed officials are likely to be less dovish in the coming weeks. In addition, uncertainty about fiscal, trade, and immigration policies might continue to put upward pressure on bond yields.”