U.S. stocks are on pace for one of their best post-election rallies in a generation, driving all three major benchmarks to fresh all-time highs and setting up a host of Wall Street price-target changes that suggest more double-digit gains over the coming year.
The S&P 500, the broadest measure of bluechip U.S. stocks, is up around 27% so far this year. It has risen around 20% since an early August slump linked to a surge in stock and bond market volatility tied to the Japanese yen.
Since the November election, the index is up 5.15%, taking it firmly past the 6,000-point mark and well past the early- and mid-2024 predictions from Wall Street analysts.
In fact, Charlie Bilello, chief market strategist at Creative Planning, notes that the current S&P 500 level is around 680 points higher than the highest of Wall Street’s 2024 targets and 25% north of the average level of 4,861 points.
Perhaps not wishing to miss another leg of the market’s current bull run, which began in early October 2022, forecasters are now seemingly outbidding each other for the best prediction on 2025 gains, with the latest iteration coming from Wells Fargo’s Christopher Harvey.
With an admitted nod to Ian Fleming’s fictional spy-novel hero James Bond and his “007” moniker, Harvey pegged a target of 7,007 points for the S&P 500 by the end of next year, one of the highest targets on Wall Street.
The backdrop to the bull market
Citing the likely effects of a business-friendly White House and its Republican allies in Congress, as well as a broadly dovish Federal Reserve and a resilient domestic economy, Harvey sees the financial market landscape as “a backdrop where equities continue to rally.”
“On balance, we expect the Trump administration to usher in a macro environment that is increasingly favorable for stocks at a time when the Fed will be slowly reducing rates,” he said.
Related: What’s next for stocks after S&P 500 record high?
Many analysts see similar drivers for U.S. stocks, noting the Trump administration’s desire to shed business regulations, allow leeway for more mergers and acquisitions, and lower the current corporate tax rate,
At present, Harvey sees collective S&P 500 earnings rising to $274 per share next year, up from his prior estimate of $270, with a early 2026 tally of $318.50 penciled in.
US stock market return & earnings pic.twitter.com/PzC0yAcNBh
— Mike Zaccardi, CFA, CMT
(@MikeZaccardi) December 5, 2024
LSEG data, meanwhile, peg 2025 profits growing 14.3%, after a collective 10.2% advance this year. The data see a year-end total of just over $275 a share.
The earnings optimism is also buttressed by a stronger-than-expected finish to the year for the domestic economy, which was estimated to be growing at 3.2% clip by the Atlanta Fed’s GDPNow forecasting tool.
Fed interest rate support
“The U.S. economy is in very good shape and there’s no reason for that not to continue,” Federal Reserve Chairman Jerome Powell told the New York Times DealBook event Wednesday in Manhattan.
That could take the starch out of the sails of rate traders looking for further Fed easing over the second half of next year. But it’s not likely to upend the current bullish backdrop for stocks or broader risk assets.
Related: ADP Jobs report data add to case for December Fed interest rate cut
“We expect GDP
growth to come in a little stronger than currently envisioned and see a slight late-2025 benefit from a
pickup in M&A activity,” Harvey and his team wrote.
Nor is he concerned that a Trump administration focus on import tariffs, which are already a subject of hot debate on Wall Street, will stoke inflation.
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“At the risk of stating the obvious, the candidate who just won the presidential popular vote and the Electoral College is fully aware of what rising inflation does to popular opinion,” he said.
“This is why we are
somewhat dubious of the growing concern that tariffs will be aggressively instituted without a concern
for higher consumer prices.”
Related: Veteran fund manager delivers alarming S&P 500 forecast
