The year 2024 marked a historic milestone as the Dow Jones, Nasdaq, and S&P 500 all reached new record highs, fueled by the surge in artificial intelligence and significant shifts in the economic and political landscape.
Now, the banking giants have shared their outlook for 2025, providing insights into their expectations for the stock market. They are particularly focusing on the rise of the S&P 500, the performance of tech stocks, central bank policies, and other factors that could influence economic growth. Let’s take a closer look at the banks’ projections for 2025.
Banking giant JPMorgan (JPM) expects the U.S. economy to remain strong in 2025, driven by AI-driven investments and better global economic policy. It predicted that the S&P 500 will reach 6,500 by the end of 2025, representing an estimated 9% upside from current levels.
In the report, analysts noted that while 2024 was the year to determine when policy rates will decline, 2025 will focus on how low they can go. With central banks in G10 countries like the United Kingdom and Canada also lowering rates, JPMorgan expects further reductions. However, the banking giant emphasizes that while the global easing cycle is likely to support economic growth and risk assets such as stocks and high-yield bonds, it does not foresee a surge in borrowing.
Morgan Stanley (MS) is optimistic about the S&P 500 index in 2025, raising its base case projection to 6,500. This represents growth of nearly 11% from current levels, reflecting the positivity about the market’s trajectory.
“Looking forward to 2025, we think it will continue to be important for investors to remain nimble around market leadership changes, particularly given the potential uncertainty that the recent election outcome introduces,” strategists led by Michael J. Wilson said in a note.
“This is also a reason why we are maintaining a wider than normal bull versus bear case skew—base case: 6,500; bull case 7,400; bear case 4,600.” he continued.
Morgan Stanley analysts anticipate additional interest rate cuts from the Federal Reserve in 2025, which they believe could provide further support for economic growth and market stability.
Goldman Sachs (GS) expects that in 2025, the growth of the S&P 500 will occur without relying on the outperformance of the so-called Magnificent Seven, marking a notable shift in market dynamics.
The analysts anticipate that the dominance of these seven tech stocks — Apple Inc. (AAPL), Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL) (the parent company of Google), Meta Platforms Inc. (META) (formerly Facebook), Nvidia Corp. (NVDA) and Tesla Inc. (TSLA) — may taper off in 2025. While these companies have driven significant market gains in recent years, analysts suggest that their influence might narrow as broader sectors contribute more evenly to market growth.
Goldman Sachs’ chief U.S. equity strategist, David Kostin, released a report projecting an 11% rise in the S&P 500, with the index expected to hit 6,500 by the end of 2025.
Bank of America (BAC) (BofA) anticipates a strong start for U.S. equities, with the S&P 500 projected to reach 6,666 by the end of 2025. Candace Browning, head of BofA Global Research, notes that while many of the anticipated policy shifts are likely to benefit US equities, their success will depend on the timing and global response.
Savita Subramanian, head of the bank’s equity strategy in the U.S., forecasts a potential upside of more than 10% for the S&P 500, along with a 13% acceleration in earnings growth by 2025. Additionally, senior U.S. economist Aditya Bhave predicts that the Federal Reserve will reduce interest rates by 25 basis points in both March and June.
Analysts at RBC Capital Markets (RY) project that the S&P 500 could reach 6,600 by the end of 2025, implying a potential gain of approximately 10.5% for the benchmark index over the next twelve months.
Separately, in a report, Jim Allworth, investment strategist at RBC, highlighted that growing enthusiasm for AI has fueled optimism about future economic growth, supported by central bank rate cuts, driving most stocks to a series of new highs.
