MW Another bullish call for stocks in 2025. Wells Fargo raises S&P 500 target on strong economy, Trump's policy changes.
By Isabel Wang
A potentially stronger U.S. economy and likely policy shifts in Trump's second term support a bullish forecast for the S&P 500 in 2025: Wells Fargo Investment Institute
Another Wall Street firm has raised its target for the S&P 500 based on an expectations that U.S. equities should be poised to extend their bull-market run to at least the end of 2025.
Strategists at the Wells Fargo Investment Institute $(WFC)$ expected the S&P 500 SPX to finish next year around the 6,600 level, up nearly 12% from Tuesday's close, with gains expected to be driven by a strong U.S. economy and earnings growth under President-elect Donald Trump's second term.
"Our forecast for stronger economic growth, along with policies aimed at reducing regulatory costs, should help boost the S&P 500's earnings-per-share to $275 [by the end of 2025], above our prior forecast of $270," the global investment strategy team at Wells Fargo Investment Institute said in a Wednesday client note.
The Wells Fargo strategists on Wednesday lifted their 2025-end price target for the large-cap benchmark index to a range of 6,500-6,700, from 6,200-6,400 previously, making it one of the most bullish forecasts among Wall Street's biggest firms tracked by MarketWatch.
"Earnings growth should find extra support from reduced regulation [under Trump's second presidency]. A corporate tax cut remains a possibility, although the timing and amount remain uncertain," the Wells Fargo team wrote.
Further, Trump's emphasis on tariffs and U.S. produced goods could also benefit local companies whose business is mostly domestic, according to the strategists.
See: Trump's return to the White House is ushering in a 'stock picker's paradise'
Investors have been betting that Trump's second term could strengthen the economy and American corporations by providing tax relief, hiking tariffs and cutting financial regulations. But some of his economic plans also could lead to a rising fiscal deficit and a resurgence of inflation, which might harm U.S. government-debt and send interest rates higher.
That's why the Wells Fargo team expects longer-term interest rates to move higher next year from both "economic improvement" in early in 2025 and later in the year from higher inflation driven by potentially accumulating tariffs and immigration restrictions.
"We are increasing our year-end 10-year and 30-year Treasury yield targets for 2025 by 50 basis points to 4.50-5.00% and 4.75-5.25%, respectively," the strategists said. "These yield curve target changes allow the curve to steepen further and align with our favorable guidance on intermediate-term fixed income."
The yield on the 10-year Treasury note BX:TMUBMUSD10Y on Wednesday was up 2 basis points to 4.410%, while the 30-year rate BX:TMUBMUSD30Y was also up 2 basis points to trade at 4.598%, according to FactSet data.
The table below outlines the bank's 2025 year-end targets for the economy and key asset classes.
"Our forecast and target changes reflect improving conditions in the U.S. economy and likely policy changes from the incoming administration in Washington. Beyond a stronger pace of growth than we previously expected, we believe some additional inflation is likely by year-end 2025," the Wells Fargo team added.
See: Goldman channels 'Art of the Deal' as it targets 6,500 for S&P 500 next year
The Wells Fargo strategists joined peers at other major Wall Street firms - including Morgan Stanley $(MS)$ and Goldman Sachs Group Inc., $(GS)$ as well as from Yardeni Research - all of which have pumped out bullish forecasts for the stock market in 2025.
Not every Wall Street firm, however, has released fresh price targets for the S&P 500 for the year ahead.
U.S. stocks were lower on Wednesday afternoon with the tech-heavy Nasdaq Composite COMP down 1% ahead of an earnings report due from AI chip maker Nvidia Corp. $(NVDA)$ The Dow Jones Industrial Average DJIA was 0.3% lower and the S&P 500 was down 0.7%, according to FactSet data.
-Isabel Wang
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(END) Dow Jones Newswires
November 20, 2024 13:51 ET (18:51 GMT)
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