Will the S&P 500 hit 7,000 this year? Analysts are divided ahead of Trump’s inauguration

The U.S. stock market has roared back to life over the past two years, recovering from a 2022 sell-off that was described as the worst since the Great Financial Crisis.

The S&P 500 Index returned a whopping 53% in 2023 and 2024 combined, capping off one of its strongest two-year performances in recent history.

Looking ahead to 2025 and beyond, analysts are optimistic that the S&P 500 will rise even higher, thanks to a pro-business Trump administration, lower interest rates, and a recovering global economy.

However, this doesn’t mean there aren’t risks. The threat of inflation, geopolitical instability, and unexpected economic downturns could jeopardize even the most upbeat projections.

According to one contrarian analyst, the stock market has at least one more blow-off top before it enters a painful downturn that could take years to recover from.

S&P 500 predictions for 2025

Researchers and major financial institutions expect another green candle for the S&P 500 Index in 2025, calling for gains of between 9% and 17%.

Goldman Sachs is at the lower end of that range, with a year-end price target of 6,500 for the S&P 500. Goldman’s analysts cited a strong U.S. economy, positive corporate earnings, and the continued outperformance of the “Magnificent 7” tech stocks as reasons to be optimistic.

The Magnificent 7 includes Nvidia (NVDA), Apple (AAPL), Amazon.com (AMZN), Alphabet (GOOGL), Meta (META), Microsoft (MSFT), and Tesla (TSLA).

RBC Capital Economics has given a year-end price target for the S&P 500 of 6,600. Like Goldman, RBC’s analysts are optimistic about “solid economic and earnings growth,” combined with “some additional relief on inflation.”

These positive forces should outweigh any political turmoil triggered by the incoming Trump administration.

Bank of America emphasized lower interest rates and a strong job market for its 6,666 price target for the S&P 500. BoA analysts believe the Federal Reserve will cut interest rates twice this year before pausing.

“While we await key details on policy changes in the U.S., indications thus far suggest the outlook for 2025 could present big opportunities for investors,” BoA analysts said in a December report.

The bank’s head of US equity strategy, Savita Subramanian, expects the earnings growth of S&P 500 companies to reach 13% this year.

Deutsche Bank and Yardeni Research’s forecasts are particularly bullish. Their analysts believe 7,000 is within reach for the S&P 500 this calendar year.

Deutsche’s forecast is mainly based on earnings growth, corporate stock buybacks, and large capital inflows into US stocks. Despite growing concerns that stocks are overvalued, Deutsche believes investors are moving from “de-stocking to re-stocking.”

2025 will also see higher capital expenditures outside of tech, improved consumer and corporate confidence, and a manufacturing recovery.

For Yardeni Research, 2025 will see the continuation of the bull market that’s expected to last several more years. The research firm predicts the S&P 500 will reach 7,000 in 2025, 8,000 in 2026, and 10,000 by the end of the decade.

“We’re just seeing a more pro-business administration coming in that undoubtedly will cut taxes,” said Yardeni Research president Ed Yardeni. “And not only for corporations but also for individuals. Lots of various kinds of tax cuts have been discussed. And in addition to that, a lot of deregulation.”

Macro strategist David Hunter has no problem with Deutsche’s and Yardeni’s forecasts. In fact, he’s also calling for the S&P 500 Index to reach 7,000 in 2025. But unlike Yardeni, Hunter doesn’t expect the optimism to last the rest of the decade.

As Investors Observer reported, Hunter believes the stock market’s euphoria will be followed by a “global deflationary bust” that could send the S&P 500 plunging by as much as 80%.

“The global bust refers to the economy and the financial system,” said Hunter, who believes excessive debt levels have created a “house of cards” scenario for the global economy.

Once stocks crash from their peaks, it’ll take years before they recover, Hunter predicts.

4 things to watch in 2025

Whether stocks continue rising beyond 2025 or crash like David Hunter believes, it’s clear from the various perspectives that the S&P 500’s performance will depend on several variables, including:

• Economy and business cycle
• Earnings growth
• Interest rates
• Geopolitical stability

Economy and business cycle

For the past several years, much of the discourse on Wall Street has revolved around whether the US economy was heading for a recession.

So far, US GDP growth, consumer spending, and the labor market have shown resilience. According to a recent forecast of business leaders conducted by JPMorgan, the recession risk is estimated to be low for the rest of 2025.

The report found that 71% of business leaders don’t expect a recession this year, thanks in part to multiple Fed rate cuts and higher corporate revenues.

The latest batches of purchasing managers’ index (PMI) data also show that the business cycle is picking up steam, especially in the service economy.

Earnings growth

It comes as no surprise that corporate earnings play a vital role in how stocks—and the S&P 500 as a whole—perform. Several analysts, including those at Goldman Sachs and Deutsche Bank, expect corporate earnings to rise this year.

According to financial data provider FactSet, the earnings growth rate for S&P 500 companies this year is forecast to be 14.8%, which is well above the average between 2014 and 2023.

Analysts polled by FactSet also said they believe “earnings growth for companies outside the “Magnificent 7” will improve significantly in 2025.”

What’s more, all 11 sectors that comprise the S&P 500 are expected to see earnings growth this year, with technology, healthcare, industrials, communications, and consumer discretionary projected to rise by double digits.

Interest rates

Although the economy remains on solid footing, perhaps the biggest area of concern is inflation. According to the latest batch of data, the Consumer Price Index (CPI) remains well above the Federal Reserve’s 2% target.

For this reason, the central bank recently said it would proceed more cautiously with rate cuts this year. This messaging wasn’t received very well by investors, who trimmed their stock holdings at the end of 2024, triggering a sharp drop for the S&P 500.

Of course, the Fed’s messaging could change in the coming months as policymakers continue to evaluate inflation data. However, the bad news is that CPI will probably remain uncomfortably high for the foreseeable future.

“We expect a gradual deceleration from where we are, but to levels that are still uncomfortably high for the Fed,” said Deutsche Bank chief economist Matthew Luzzetti.

Geopolitical stability

Geopolitical tensions in Eastern Europe and the Middle East have thrown a wrench into the stock and commodity markets. The incoming Trump administration has promised to quell these tensions, but has also vowed to initiate another trade war with China and Canada.

“Trade conflicts and tariffs between key blocks (notably the U.S., EU, and China) could affect growth and the prices of imported goods,” S&P Global analysts Nicole Serino and Christian Esters said.

“Trade flows could also be exposed to geopolitical threats, as is the case in the Red Sea. More restrictive measures on immigration could affect labor supply, and therefore stoke inflation,” they explained.

Improved geopolitical conditions are considered key for the S&P 500 to really hit its stride this year.