U.S. stocks expected to rise at least 5% next year? Wall Street's major firms' year-end predictions are in: everyone is bullish!

Analysts from major Wall Street firms have basically released their annual forecasts, with an average prediction that the S&P 500 index will rise by about 10%, which is in line with historical averages. After two years of gains above historical averages in the U.S. stock market, the general expectation among most strategists is now aligned with historical averages.

Analysts' predictions for the S&P 500 index range from 6,400 to 7,007 points. This indicates a potential increase of 5% to 15% from last Friday's closing level of 6,090 points. This range is narrower than last year's target range, with many analysts expecting a return rate between 8% and 10%.

Key Factors Influencing the U.S. Stock Market in 2025 According to Analysts

U.S. President-elect Donald Trump has proposed some radical reforms to trade policy and business regulation. Some of these proposals, such as new tariffs and stricter immigration policies, are expected to negatively impact businesses, potentially suppressing demand while triggering inflation. This uncertainty makes forecasting for the coming year exceptionally difficult. In addition to their baseline scenario forecasts, many strategists have been discussing bull and bear market scenarios.

However, the negative impacts may be limited. Analysts believe that Trump's policies will not lead to the worst outcomes. Instead, they view these as paving the way for more moderate policies. Furthermore, strategists believe that the favorable factors brought by low tax rates and deregulation will offset any potential adverse effects.

Analysts expect the U.S. economy to continue growing. As job creation cools and household financial conditions normalize, economic growth may not be as robust as in the early stages of recovery. But growth is still growth, which is beneficial for income. A less hawkish Federal Reserve would be helpful.

Corporate profit margins are expected to rise. U.S. companies have not fully realized the measures taken in recent years to improve operational efficiency. This includes strategic layoffs and hiring as well as upgrading technology. Due to positive operating leverage, even moderate sales growth could translate into significant profit margin growth. Lower inflation should help reduce costs, but this may change with the evolution of trade policies.

Earnings growth is expected to further expand. The current bull market has largely been driven by the "Magnificent Seven" tech giants, as these companies have seen very strong earnings growth. Analysts currently expect that as the growth of the seven giants cools, the "other 493" constituents of the S&P will achieve better earnings growth.

However, all strategists acknowledge that U.S. stock valuations are high, which they believe limits upside potential. Nevertheless, high valuations do not necessarily mean low returns next year. Price growth in 2025 will be less related to valuation expansion and more related to earnings growth.

In summary: The fundamentals supporting earnings growth are solid. Current valuations are above historical averages but are not cause for alarm. As always, there is a lot of uncertainty. Overall, the outlook for the U.S. stock market is favorable.

Target Price for the S&P 500 Index in 2025

Below is a summary of 14 predictions for the target level of the S&P 500 index in 2025, along with earnings per share forecasts, including key points from strategist comments UBS: 6400 points, $257

"After the stock market rebound following Trump's cabinet appointments this year, we expect a moderate decline in the stock market in the first half of next year due to a slowdown in U.S. economic growth. Once earnings expectations drop to more realistic levels, the second half of 2025 should be better."

Morgan Stanley: 6500 points, $271

"Looking ahead to 2025, we believe it remains important for investors to maintain flexibility regarding changes in market leaders, especially considering the potential uncertainties brought about by recent election results. This is also why we maintain a larger bull-bear deviation than normal — base scenario: 6500; bull scenario: 7400; bear scenario: 4600."

Goldman Sachs: 6500 points, $268

"We expect net profit margins to increase by 78 basis points to 12.3% in 2025, followed by a further increase of 35 basis points to 12.6% in 2026. Our economists believe that the Trump administration will impose targeted tariffs on imported cars and some products imported from China. They also assume a 15% corporate tax on domestic manufacturers. Overall, the impact of these policy changes on our earnings per share forecast largely offsets each other."

JP Morgan: 6500 points, earnings per share $270

"The U.S. stock market should continue to be supported by an expanding business cycle, American exceptionalism (which helps to expand the AI cycle and profit growth), ongoing easing policies from global central banks, and the Federal Reserve's QT reduction in the first quarter. Meanwhile, American households are benefiting from a tight labor market, sitting on record wealth (which increased by $10 trillion over the past year, reaching about $165 trillion by the second quarter of 2024, and up $5 trillion since the COVID-19 pandemic), along with potential declines in energy prices. Heightened geopolitical uncertainty and an evolving policy agenda add unusual complexity to the outlook, but opportunities may outweigh risks. The benefits of deregulation and a more business-friendly environment, along with the potential for increased productivity and capital allocation, may be underestimated."

CFRA: 6585 points

"This new target level incorporates fundamental, technical, and historical factors, influenced by an expected growth of 2.4% in U.S. real GDP and a 13% increase in S&P 500 operating profits, supported by inflation data and a continued decline in interest rates. After two consecutive years of double-digit growth, the historical returns of a third-year bull market, combined with overvaluation relative to the 10-year average (using current forward P/E, market cap to total revenue, and total enterprise value to forward EBITDA metrics), have tempered our optimism, leading to a forecast for annual price increases below average."

Royal Bank of Canada: 6600 points, $271

"The data tells us that another year of robust economic and earnings growth, some political tailwinds, and additional easing of inflation (which should raise the P/E ratio of the S&P 500) could allow the stock market to continue rising over the next year." Barclays: 6600 points, $271

“For the U.S. stock market, we believe that macro positive factors will outweigh negative factors next year. … We expect that by 2025, most sectors will be affected by anti-inflationary profit margin pressures and slowing growth outside the U.S., while large tech companies will continue to offset upward impacts.”

Bank of America: 6666 points, $275

“Get ready for cyclical hell. Nine reasons: (1) economic recession, (2) Federal Reserve interest rate cuts, (3) accelerating profits, (4) repatriation, (5) productivity cycle, (6) the shift from everyone spending on technology to spending on technology in all aspects, (7) municipal authorities renovating to attract businesses, (8) capacity constraints/insufficient manufacturing spending, (9) the lightest positioning in cyclical sectors since at least the global financial crisis.”

BMO: 6700 points, $275

“A bull market can, will, and should slow down from time to time; this is a digestion period, which in turn will only highlight the health of the long-term bull market. Therefore, we believe that the investment environment in 2025 will be more normalized, with performance across sectors, sizes, and styles being more balanced.”

HSBC: 6700 points

“We expect next year’s stock returns to be concentrated on earnings growth, as valuations are more overstretched… Overall, we expect earnings to grow by 9%, which includes a slowing but still resilient U.S. economy and some margin expansion.”

Deutsche Bank: 7000 points, $282

“Attention is focused on late-cycle indicators, while early-cycle indicators have been rising. We see that various aspects of the cycle have yet to begin, including inventory reduction, capital expenditures outside of technology, capital markets and mergers and acquisitions, loan growth, and growth in other parts of the world. The potential policy changes from the new government could have both positive and negative impacts on economic growth, so sorting will be key, but we expect economic growth to remain a priority. In several rounds of the last trade war, as tensions escalated, the stock market sold off, only to be followed by a calming of the situation.”

Yardeni Research: 7000 points, $290

“Just after Trump won the presidential election on November 8, 2016, we observed that the economy and the stock market were invigorated by ‘animal spirits,’ a term coined by John Maynard Keynes, meaning spontaneous optimism. Now that Trump has won a second term on November 5, the animal spirits are back…”

Capital Economics: 7000 points

“These forecasts are based on the assumption that the U.S. economy will not block the stock market bubble, which has been inflated around the hype of artificial intelligence and now appears bolder than before. However, we do not mind raising our forecasts simply because the index has risen and reacted very positively to the news of Trump’s victory. A key reason is that we believe his policies will have a net negative impact on economic growth in the U.S. and other regions. Furthermore, if it is correct to exclude significant fiscal expansion from feasible assumptions, then U.S. corporate profits may not be boosted by further cuts in corporate taxes Nevertheless, we maintain our existing forecast for the S&P 500 index, as we believe that Trump's election will not disrupt the economy nor prevent the expansion of the artificial intelligence bubble."

Wells Fargo: 7007 points, $274

"Overall, we expect the Trump administration to usher in a macro environment increasingly favorable to the stock market, while the Federal Reserve will slowly lower interest rates. In short, this is a backdrop for continued stock market growth."

Overall, Wall Street analysts remain optimistic about next year's earnings per share growth. However, accurately predicting the stock market's trajectory a year from now is extremely difficult. In addition to the countless variables to consider, there are also some completely unpredictable developments. As new information emerges, strategists often revise their targets. Price forecasts from major Wall Street firms should be viewed as a compass rather than a GPS