Here’s What Morgan Stanley And BMO Capital Markets Say About S&P 500’s 2025 Target
By Stocktwits Inc | First Published Nov 18, 2024, 11:57 PM ISTMorgan Stanley Strategist Michael Wilson reportedly expects the S&P 500 hitting 6,500 next year, implying an upside of over 10% from current levels.
The S&P 500 has gained over 24% so far this year but analysts expect the index to record significant upsides from current levels by next year.
Morgan Stanley Strategist Michael Wilson reportedly expects the S&P 500 hitting 6,500 next year, implying an upside of over 10% from current levels.
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“The combination of the Fed rate cutting cycle with the election result has the potential to drive broad sentiment materially higher,” Wilson wrote in a note, according to a CNBC report.
The strategist’s most optimistic bullish scenario puts the index at 7,400 while his bearish scenario places it at 4,600.
“We would also add that if this administration is successful in cutting back government spending, this could lead to weaker growth next year than what is anticipated in our base case,” Wilson stated in his note. “This is also a reason why we are maintaining a wider than normal bull versus bear case skew.”
On the positive side, the Federal Reserve has begun its policy easing cycle and has already reduced the Fed Funds rate by a cumulative 75 basis points over the last two months. The economy remains strong and fears of a hard landing have taken a back seat.
But what worries economists and investors is the fact that Trump’s policies on mass immigration, tax cuts and tariff hikes could lead to higher inflation in the coming times, limiting the central bank’s margin for further rate cuts.
And the Fed has been vocal about its stance on further policy easing. Last week, Chair Jerome Powell said that the economy is not sending any signals which indicated there is a need to be in a hurry to lower rates, sparking doubts on the pace of rate reductions in the coming months.
“The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully. Ultimately, the path of the policy rate will depend on how the incoming data and the economic outlook evolve,” Powell said in his speech.
However, BMO Capital Markets’ chief investment strategist Brian Belski reportedly expects the S&P 500 to scale 6,700 by the end of 2025, implying about 14% appreciation from current levels.
“According to our work, an environment of high single digit annual price gains coupled with at or near double digit earnings growth and price to earnings ratios in the high teens to low twenties over the next few years would be a good start on the path to normalization,” he said, according to a CNBC report.
One Stocktwits user believes the S&P 500 should hit the 7,000 mark by next year.
The SPDR S&P 500 ETF Trust ($SPY), which seeks to provide investment results that, before expenses, correspond to the price and yield performance of the S&P 500, was trading in the green on Monday noon.
Retail sentiment for the ETF flipped into the ‘bullish’ territory (59/100) from ‘neutral’ a day ago.
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