At first glance, it might appear odd to mention concerns about the market when so much of the discussion about the year ahead points to a continuation of 2023 and 2024. That is, bull-market euphoria. According to FactSet, stock price forecasts from equity analysts imply that the S&P 500 will notch another double-digit gain in 2025 – the index’s third in three years.
Based on average target prices for individual stocks, analysts expect the index will close at 6,721 by the end of the year, up about 14 per cent. Ed Yardeni, chief investment strategist at Yardeni Research, is even more bullish than analysts and most of his Wall Street peers. He believes the S&P 500 will rally to 7,000, for a 19-per-cent gain in 2025, driven by a combination of subdued inflation, solid U.S. economic activity and record-high profit margins fuelled by corporate tax cuts. “We are expecting that earnings growth will account for all of next year’s gain in the S&P 500, with a slight decline in the forward price-to-earnings ratio,” Mr. Yardeni said in a December note, meaning that stock valuations can fall even as prices rise, thanks to surging profits. According to Savita Subramanian, equity and quant strategist at Bank of America, fund managers are also feeling good about stocks following a strong rotation from cash to equities in December. If an upbeat stock market outlook strikes you as a key reason to feel skeptical about 2025, especially after the S&P 500 gained 23 per cent in 2024 and 24 per cent in 2023, here’s the good news: You’re not alone.weekly sentiment survey from the American Association of Individual Investors, which polls members on their stock market outlook for the six months, marked the fourth straight decline in bullishness. For the week ended Jan. 1, just 35.4 per cent of the retail investors that comprise AAII members felt bullish. That’s down from 43.3 per cent who felt the same way three weeks ago and well below a recent high of 52.7 per cent in Jul
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