The stock market outlook for 2025 is cautiously optimistic, with Wall Street forecasters expecting another positive year despite hefty gains in 2024. Investors who have watched from the sidelines as stocks soared to new highs in the last two years might be offered an attractive entry point in 2025. Scott Wren, senior global market strategist at Wells Fargo, believes the market is moving towards an “opportunity zone” this year.
The bank sees the S&P 500 ending the year between 6,500 and 6,700, implying as much as a 13% increase from the index’s current levels. Wren suggests investors should be ready to take advantage of any market pullbacks. “In the coming weeks and months, the potential for more attractive entry points to increase exposure could very well materialize in both equities and fixed income.
We want to be ready,” Wren wrote in a note to clients. Stocks have stumbled in recent weeks as investors weighed the possibility that some economic policies could stoke fresh inflation pressure and influence interest rates to stay higher for longer.
Cautious outlook on market corrections
However, new data showing that core inflation came in slightly cooler than expected during December has bolstered investors’ hopes for lower rates, with markets still pricing in one or two cuts by the end of the year. Mark Hackett, the chief market strategist at Nationwide, said that stocks are still supported by strong fundamentals. He believes the economy looks poised to avoid a downturn in 2025 and strong tech gains will continue to support the broader market.
“Market corrections are a normal part of the cycle, typically occurring roughly every 18 months, and we’re due for one. The 8% pullback we’re seeing for the average S&P 500 company isn’t disorderly or panic-driven, but rather a natural recalibration after a strong year,” Hackett wrote of the latest sell-off after markets touched record highs in December. Adam Turnquist, the chief technical strategist at LPL Financial, also noted the positive backdrop for stocks, despite recent “technical damage” in the S&P 500 and the potential for further losses.
Turnquist pointed to strong expectations for corporate earnings growth and continued enthusiasm for AI, which could help power the market higher. Wall Street is generally expecting another positive year for stocks in 2025, even after back-to-back years of more than 20% gains for the S&P 500. The average year-end target for the benchmark index is 6,539, implying an 8% gain from current levels.
