Two Strategists Predict Continued Bull Market Through 2025

As 2024 approaches, skepticism surrounds the stock market's ability to maintain its upward momentum following a robust performance in 2023. With persistent high inflation and the Federal Reserve yet to signal any interest rate cuts, many were cautious. Predictions for the S&P 500 (^GSPC) varied widely, spanning from 4,200 to 5,400.

However, those cautious estimates did not hold up. The S&P 500 surpassed expectations, closing the year at 5,881 after reaching the 6,000 mark several times and achieving 57 all-time highs throughout the year. Although most strategists misjudged the strength of the 2024 market, two notably accurate forecasters, Ed Yardeni from Yardeni Research and Tom Lee from Fundstrat, believe the upward trend will persist into 2025. Their projections for the S&P 500 might be surprising to many.

Could the S&P 500 Reach 7,000?

Yardeni started 2024 with an optimistic target of 5,400, the highest estimate on Wall Street at the time. Although the market exceeded this prediction, Yardeni foresaw the Federal Reserve implementing three to four rate cuts during the year and subsequently raised his S&P 500 target to 5,800 midway through.

Lee, who had also accurately forecast the previous year's rally, initially estimated the S&P 500 would reach 5,200 but adjusted his outlook as early as January, later predicting a peak of 6,000 by October.

Having gained recognition for their successful predictions, both strategists are bullish on stocks for 2025. They anticipate a potential 19% increase from current levels (as of January 3), with the S&P 500 possibly soaring to 7,000.

This bold target invites intrigue, especially since many analysts who missed predicting the past two years’ outcomes are now leaning towards Yardeni and Lee's projections. A survey among 21 Wall Street analysts indicates a median target exceeding 6,600 for 2025.

While both Yardeni and Lee share an optimistic outlook, they foresee the market reaching 7,000 at different intervals during the year. Yardeni pointed out potential risks, including trade policies from President-elect Donald Trump, but remains confident about the market's capacity to hit 7,000 by year's end.

Importantly, Yardeni's bullish stance is not solely reliant on further interest rate cuts, arguing instead that inflation appears controlled and that the U.S. economy is witnessing a surge in productivity driven by technological advances like robotics and artificial intelligence.

Lee, on the other hand, is even more aggressive, suggesting that the S&P 500 may approach 7,000 within the first half of 2025. He believes that concerns over inflation are exaggerated and anticipates a more supportive stance from the Federal Reserve than many investors expect.

Moreover, Lee envisions a favorable business environment under a pro-business Trump administration, which could stimulate market enthusiasm and encourage corporate leaders. However, he predicts a pullback later in the year, ultimately forecasting an end-of-year target around 6,600.

Understanding Market Predictions

When it comes to market predictions, it is crucial for investors to realize that accurately forecasting future stock prices is inherently challenging. While market strategists are highly skilled professionals, their work is not easy, and it is reasonable to allow room for error.

Investors should not dwell on single-year predictions. It's also essential to recognize that both Yardeni and Lee lean towards optimism. Yardeni has expressed beliefs that the S&P 500 could reach 10,000 by the end of the decade, while Lee has floated the idea of 15,000 in the future.

While these predictions may prove true, the most dependable expectation is that the S&P 500 will trend upward over the long term. For those with an investing horizon of five, ten, or even twenty years, maintaining a steady investment strategy is generally advisable.

Despite the cautious stance of some analysts regarding near-term market dynamics, particularly due to the volatility often triggered by unfavorable news, it is commendable that Lee and Yardeni have made accurate predictions thus far.

Bram Berkowitz has no position in any of the stocks mentioned. This content does not imply any endorsement of the mentioned companies.

strategists, market, predictions