The most optimistic prediction for the US stock market on Wall Street: The S&P 500 will reach 7,000 points by the end of next year!

Deutsche Bank strategist Bankim Chadha recently released a forecast for the U.S. stock market, expecting the S&P 500 index to reach 7,000 points by the end of next year. This is the most optimistic expectation among Wall Street strategists for further gains in U.S. stocks.

Currently, the S&P 500 index stands at 5,987 points, making Chadha's forecast 17% higher than the current index level.

Chadha's prediction far exceeds those of Goldman Sachs and Morgan Stanley strategists, who recently raised their U.S. stock targets for the end of 2025, expecting the S&P 500 index to reach 6,500 points by then.

The strong U.S. economy, gradual easing of inflation, and the market's general expectation of a loosening of Federal Reserve monetary policy all provide momentum for the rise of U.S. stocks. Especially driven by large technology stocks, the S&P 500 index has reached a historic high.

U.S. Stocks Perform Strongly, Future Earnings Expectations Optimistic

So far this year, the S&P 500 index has surged over 25%, and is expected to see a second consecutive year of returns exceeding 20%. Such performance has only occurred four times in the past 100 years.

Chadha stated in the report that even next year, the stock market will continue to show strong performance:

“We believe the stable growth momentum of the U.S. economy will continue until 2025, with expected earnings per share maintaining a low double-digit growth rate.”

He further predicts that earnings per share for the S&P 500 index will grow by about 11% in 2024, reaching $253. By 2025, earnings per share are expected to grow to $282. If the global economy can achieve a strong rebound, the growth rate of earnings could reach 17%, with earnings per share potentially exceeding $295.

It is worth noting that the current valuation of the U.S. stock market remains high compared to other regions of the world. The current expected price-to-earnings ratio for the S&P 500 index is about 24 times, close to the peak during the tech bubble.

Chadha mentioned that over the past 10 years, the earnings growth rate of U.S. stocks has been above trend levels, and the dividend payout ratio has continued to rise. Additionally, large-scale stock buybacks and capital inflows have also provided extra support for the stock market. This series of factors makes the U.S. stock market more attractive to investors.

Chadha believes that although the policies that Trump may implement could have both positive and negative effects on growth, the order of implementation will be key. He expects Trump to follow a similar pattern to his first term, starting with tax cuts and deregulation, followed by tariff measures; promoting economic growth may still be the top priority