CFRA predicts that the S&P 500 index is expected to surge to 6,585 points next year, but the bull market volatility warning has been upgraded!
CFRA predicts that the S&P 500 index will reach 6,585 points by the end of 2025, an increase of 11%. Although earnings expansion has driven this expectation, market volatility is expected to increase. Compared to Thursday's closing price of 5,948.71 points, the forecast shows significant growth. CFRA Chief Investment Strategist Sam Stovall noted that U.S. real GDP is expected to grow by 2.4%, and operating profits of S&P 500 constituents are projected to increase by 13%. Despite entering the third year of a bull market, the S&P 500 index has risen about 25% this year. Market volatility (VIX) is expected to rise, as historically there have been multiple declines in the first year of a presidential term. Positive factors include declining inflation and interest rates
According to the Zhitong Finance APP, CFRA Research predicts that the S&P 500 index will reach 6,585 points by the end of 2025, representing an expected increase of 11%, primarily driven by earnings expansion. However, the research firm indicated that volatility is expected to increase during the next market bull cycle. Compared to the benchmark index's closing price of 5,948.71 points on Thursday, this forecast shows significant growth, and it is also about 7% higher than CFRA's estimated closing price of 6,145 points for 2024.
CFRA's Chief Investment Strategist Sam Stovall noted in a report on Wednesday that this new target incorporates fundamental, technical, and historical factors, with the expected growth of U.S. real GDP at 2.4% and a projected 13% increase in operating profits for S&P 500 constituent companies playing a key role.
Although this forecast implies that the U.S. large-cap stock market will enter its third year of a bull market, CFRA pointed out that some factors have weakened optimism, suggesting that the annual price increase may be below average. These factors include the S&P 500 index achieving double-digit growth for two consecutive years and valuations being too high relative to the 10-year average. It is reported that the S&P 500 index has risen about 25% so far this year.
Additionally, Stovall also predicts that market volatility (VIX) will rise, as historically nearly 90% of presidential first years have experienced declines of over 5%, with an average drop of 17.5%. This prediction is particularly noteworthy considering that Donald Trump will return to the White House in January next year, and the Republican Party will control both the Senate and the House of Representatives.
However, Stovall also mentioned some positive factors, such as the continued decline in inflation and falling interest rates, which will be the pillars for achieving double-digit earnings growth in 2025. According to the Chicago Mercantile Exchange's FedWatch tool, the Federal Reserve is in a rate-cutting cycle, with the benchmark rate possibly dropping to at least 3.75%-4.0% next year. Meanwhile, S&P Capital IQ generally predicts that corporate earnings per share will grow by 8.5% in 2024.
It is understood that exchange-traded funds (ETFs) tracking the S&P 500 index include Vanguard S&P 500 ETF (VOO.US), ProShares Ultra S&P500 (UPRO.US), iShares Core S&P 500 ETF (IVV.US), ProShares UltraShort S&P500 (SDS.US), and Guggenheim S&P 500 Equal Weight ETF (RSP.US)