earnings as well as our price targets for the index. We did so because we believe that Trump 2.0 represents a major regime change from Biden 1.0 .
That’s a fairly conventional outlook as long as the global economy continues to grow, with strength in the US offsetting weakness elsewhere in the world, especially China and Europe.We are lowering our S&P 500 earnings per share forecast for this year from $250 to $240 mostly because of strikes and hurricanes. That’s still up 8.4% y/y. On the other hand, we expect that Trump 2.0 will boost earnings over the next two years.
Since the start of 2023, almost all of the increase in S&P 500 aggregate forward earnings has been attributable to rising estimates for the Magnificent-7’s earnings. We expect to see a broadening of the companies and industries for which analysts raise their sights in 2025. Multiples rose as they became less fearful of a Fed-led recession during the past three years. Multiples may stay elevated if investors conclude that a recession is less likely over the rest of the decade now that monetary policy is easing while fiscal policy remains stimulative.
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