Market Analysis
Goldman Sachs has projected that the S&P 500 index will climb to 6,500 by the end of 2025, aligning with similar expectations from Morgan Stanley (NYSE), driven by ongoing U.S. economic expansion and corporate earnings growth.
The Wall Street firm’s target suggests a 10.3% increase from the index's recent close of 5,893.62.
On Monday, Morgan Stanley also predicted the benchmark index would reach 6,500 by late next year, anticipating a sustained rise in U.S. earnings growth through 2025. This forecast is supported by expectations of Federal Reserve interest rate cuts and improving business cycle indicators.
Goldman noted that the so-called 'Magnificent 7' stocks—Amazon (NASDAQ), Apple (NASDAQ), Alphabet (NASDAQ), Meta Platforms (NASDAQ), Microsoft (NASDAQ), Nvidia (NASDAQ), and Tesla (NASDAQ)—are poised to outperform the remaining 493 companies within the index next year. However, their expected outperformance margin is around 7 percentage points, the narrowest in seven years, according to Goldman.
"While 'micro' factors such as earnings trends continue to favor the Magnificent 7, broader 'macro' elements, including economic growth and trade policy, may benefit the remaining S&P 493 companies," the firm commented.
Goldman forecasts corporate earnings growth of 11% and real U.S. GDP growth of 2.5% in 2025 but cautioned that broader market risks remain elevated. These include potential threats from tariffs and higher bond yields.
On the flip side, the brokerage highlighted that a more favorable fiscal policy mix or a dovish Federal Reserve stance could present additional upside potential.
Following Donald Trump’s recent victory in the U.S. Presidential election, there is heightened attention on his pledges to cut taxes and raise tariffs, which are expected to increase inflation and limit the Fed's ability to lower interest rates.
Goldman further projects earnings per share (EPS) for S&P 500 companies to reach $268 in 2025.
Paraphrasing text from "Reuters" all rights reserved by the original author.