A recent Reuters poll of equity strategists suggests that the S&P 500 is expected to gain more than 8% by the end of 2025, buoyed by anticipated U.S. interest rate cuts and potential deregulation under President-elect Donald Trump. This outlook reflects optimism for continued economic growth, which is expected to enhance corporate earnings.
Financial stocks are among the top sector picks for strategists as they anticipate favorable conditions from Trump’s proposed deregulation policies. Many believe that Trump’s agenda, including tax cuts and deregulation, could stimulate economic growth and lead to further market gains.
The median forecast from 48 equity strategists, analysts, and portfolio managers indicates that the S&P 500 will end 2025 at 6,500 points, representing an increase of approximately 8.5% from its recent close of 5,987.37. This projection is notably higher than the 5,900 forecast from a previous poll in August.
Following Trump’s victory in the presidential election on November 5, the S&P 500 has seen significant gains, climbing about 26% in 2024, largely driven by strong performances from major technology firms like Nvidia and Microsoft, which are at the forefront of the AI technology race.
David Kostin, chief U.S. equity strategist at Goldman Sachs, noted in his 2025 outlook that the so-called “Magnificent 7” stocks, including Nvidia and Microsoft, are likely to continue performing well, though at a reduced rate compared to this year. He anticipates overall earnings growth for the S&P 500 to push the index to 6,500 by the end of next year.
Analysts predict a 14.2% increase in earnings for the S&P 500 in 2025, up from 10.2% this year. Despite the current S&P 500 trading at 22.6 times expected earnings—above its 10-year average of about 18—Mary Ann Bartels, chief investment strategist at Sanctuary Wealth, expressed confidence in the market, citing expected economic growth.
However, there are concerns about a potential rebound in inflation that could limit the Federal Reserve’s ability to continue cutting rates. The Fed initiated its easing cycle with a significant half-point rate cut in September, the first reduction since 2020. Additionally, Trump’s plans for higher tariffs could increase consumer prices, as he has already pledged substantial tariffs on Canada, Mexico, and China.
Investors are also wary of ongoing instability in the Middle East. When asked about the likelihood of a stock market correction of at least 10% early next year, eight out of 17 poll participants indicated it is likely, while two considered it highly likely. Six respondents deemed it unlikely, and one said it was highly unlikely.
Among sectors, financials have surged about 35% year-to-date, leading the S&P 500, with technology following closely at 33%. Bank stocks have particularly benefited from expectations of increased merger activity. Deutsche Bank strategists noted in their outlook report that they remain bullish on financials due to several converging positive factors.
The poll projects that the Dow Jones Industrial Average will finish next year at 46,600, up from its recent close of 44,736.57.
