What To Expect From the US Stock Market in 2025
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Wall Street analysts generally expect stocks to post another strong year in 2025 as a strong economy and falling interest rates boost corporate earnings.
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The gap between the Magnificent Seven and the rest of the market is expected to narrow as more companies begin to reap the benefits of artificial intelligence.
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Small-cap and mid-cap stocks could do well in the coming year thanks to lower interest rates as well as an easier regulatory environment under incoming President Donald Trump.
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Some analysts warn, however, that market volatility could increase after Trump returns to the White House, given the uncertainty over how his policy approach could affect the economy.
Stocks have just had a great year, and Wall Street is optimistic that US stocks will continue to rise in 2025.
The S&P 500 is up 23% in 2024 after rising 24% last year, its first two-year return of +20% since the late 1990s will not be strong, but market watchers say the outlook is generally positive.
Here’s some of what analysts say you can expect from the stock market in the coming year.
Corporate earnings are expected to be the main driver of stock returns in 2025.
Earnings growth has been small over the past two years, with increased spending on artificial intelligence and a series of cost cuts contributing to higher tech gains. although JPMorgan analysts expect the group to post double-digit profit growth in 2025.
The Magnificent Seven’s total earnings growth is still expected to outpace the rest of the index, albeit by the slimmest margin in seven years, according to Goldman Sachs forecasts.
That’s one reason why equity analysts at Bank of America expect the S&P 500 to outperform its capitalization-weighted counterpart.
Artificial intelligence has been the buzzword on Wall Street for more than two years now, and analysts see that continuing.
“We see the development and adoption of artificial intelligence creating opportunities in a variety of industries,” BlackRock analysts wrote in their 2025 outlook.
Goldman analysts have similar expectations. They say the AI craze has gone through two “phases”. “Phase 1” focused exclusively on Nvidia (NVDA:), whose advanced chips made it a key driver of the AI boom; “Phase 2” was a bit more extensive and included companies critical to building the AI infrastructure.
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