S&P 500 Forecast: US Stock Market Outlook 2025

It’s been a remarkable year for the S&P 500 Index – but what does the future hold for the bellwether of the US stock market?

The outstanding performance of the so-called ‘Magnificent Seven’ stocks drove the index to an all-time high of around 5,670 in July 2024.

But its performance has been more volatile since and led to some commentators questioning whether it’s become too concentrated.

In our S&P 500 forecast for 2024 and beyond, we examine the index’s key drivers, observers’ future predictions, and what is likely to influence the end-of-year forecast.

Table of Contents Table of Contents

1. Key Takeaways
2. S&P 500 Predictions Summary
3. S&P 500 Performance Analysis
4. Key Factors Affecting S&P 500 Performance
5. Analysts' S&P 500 Forecast 2025
6. Analysts' Long-Term S&P 500 Predictions for the Next 5 Years
7. Why Is the S&P 500 Important?
8. The Bottom Line
9. FAQs
10. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. S&P 500 Predictions Summary
3. S&P 500 Performance Analysis
Show Full Guide
4. Key Factors Affecting S&P 500 Performance
5. Analysts' S&P 500 Forecast 2025
6. Analysts' Long-Term S&P 500 Predictions for the Next 5 Years
7. Why Is the S&P 500 Important?
8. The Bottom Line
9. FAQs
10. References

S&P 500 Predictions Summary

We go into more detailed S&P 500 predictions of analysts and observers later in this piece, but here is a summary of the main views.

S&P 500 Performance Analysis

The S&P 500 has enjoyed a strong year, particularly over the first six months when it was driven by high-flying technology companies.

This helped push the index up around 20% to an all-time high of almost 5,670 by the middle of July this year.

Although it has since fallen back (on September 10, 2024, it stood at 5,495.52), that’s still 16% higher than January 2024.

More recently, the S&P 500 was up 2.28% in August, which brought its year-to-date return to 18.42%, according to S&P’s update on US equities.

Howard Silverblatt, senior index analyst at S&P, wrote:

“August continued July’s volatility and uncertainty, but in the end, the S&P 500 delivered gains, just as July had done, as the index closed the month just shy of its July 16, 2024, closing high.”

He also pointed out that the S&P 500’s market value increased $1.059 trillion for the month to $47.448 trillion and was up $7.400 trillion year-to-date.

However, the question is: Will the S&P 500 continue to rise? Next we will look at the key factors that are likely to be influential over the coming months and years.

Key Factors Affecting S&P 500 Performance

One of the difficulties in trying to predict the future of the S&P 500 is gauging the various factors that can influence the index.

Interest Rates

Arguably the most important question is whether the US Federal Reserve cuts interest rates over the coming months.

Daniel Grosvenor, director of equity strategy at Oxford Economics, believes falling rates will help to support an ongoing broadening of performance. He wrote:

“We think the Federal Reserve will embark on a gradual easing cycle this month. Inflation is becoming less of a concern and the Fed’s attention is now turning to downside risks to employment.”

Oxford Economics is forecasting a 25bps rate cut in September and another in December, followed by a 25bps cut at every other meeting in 2025.

Grosvenor sees the outlook as positive for equities as they “typically fare well” following the onset of an easing cycle, as long as economic growth holds up.

“Indeed, the average S&P 500 price return in the 12 months following ‘insurance cuts’ – such as those in the mid-1990s – has been almost 20%,” he added.

Inflation

As far as inflation is concerned, short and longer-term expectations remain unchanged, according to the Federal Reserve Bank of New York.

Its latest survey puts consumers’ one- and five-year-ahead inflation expectations at 3% and 2.8%, respectively.

“Median inflation expectations at the three-year-ahead horizon rebounded somewhat from July, increasing to 2.5% from 2.3%,” it noted.

Over the longer term, US inflation is expected to decrease to 2.1% by 2029, according to Statista.

US Presidential Election

Less than two months before the election, commentators expect a close race between Vice President Kamala Harris and former President Donald Trump.

Investors are likely to focus more on the potential ramifications of the election’s outcome for businesses, the economy, and capital markets as it draws closer.

That’s the opinion of Rob Haworth, senior investment strategy director at US Bank Wealth Management. He said:

“We need some clarity around key issues to be able to identify potential market winners and losers based on who wins the election.”

Large Stocks

A lot could depend on the prospects of the tech giants that enjoyed a particularly strong first half of the year due to the enthusiasm for artificial intelligence-related stocks.

However, life has been a bit more challenging for them of late, according to Russ Mould, investment director at AJ Bell. He said:

“The so-called Magnificent Seven of Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla have already shed $2.5 trillion (or 15%) of their combined market capitalization since the peak in July of this year, as doubts about their lofty valuations, worries about increased regulatory pushback and more questions about the degree and timing of the payback for companies that are spending heavily on AI continue to gather.”

Smaller Companies

Of course, the S&P 500 isn’t just about international household names such as Apple (AAPL) and Microsoft (MSFT). Its list of constituents also includes plenty of smaller names.

Their presence can mean the index is more volatile than the Dow Jones (DJIA), which has a more concentrated number of stocks.

So, how influential are all these factors likely to be over the coming months and years? In the next section, we look at some of the latest analysts’ projections for the S&P 500.

Analysts’ S&P 500 Forecast 2025

So, what are analysts’ S&P 500 projections? Are they expecting the S&P 500 to reach new highs over the coming months, or is stagnation more likely?

Could the S&P 500 Hit 6,000?

Reasons to Be Positive

Analysts’ Long-Term S&P 500 Predictions for the Next 5 Years

What about the S&P 500 long-term forecasts? Obviously, a lot of factors come into play when predicting movements in the S&P 500 for the next 5/10 years.

Most analysts are reluctant to give a firm S&P 500 forecast 2025-2030, but some sources give an idea of possible future movements.

However, the S&P 500 has generally been a friend to investors over the years, according to a detailed analysis of its long-term returns by McKinsey & Company.

It found the mean total yearly returns (including dividends) of the S&P 500 from 1996 to mid-June 2022 is 9% in nominal terms, or 6.8% in real terms, in line with historical results.

It stated:

“There were fluctuations, of course. The S&P 500 declined in 2000, 2001, and 2002, followed by a 37 percent fall in 2008 and a 22 percent fall in the first half of 2022. But from 1996 to mid-June 2022, S&P 500 returns declined annually only five times.”

Why Is the S&P 500 Important?

After we’ve considered the S&P 500 expectations of leading financial experts, let’s take a look at why the index is regarded so highly.

The Bottom Line

What is the most realistic S&P 500 outlook? Is the index likely to rise over the coming year, fall back, or stay the same?

It sounds like a simple question but economists and analysts are certainly divided. Even predictions for the end of this year range from 4,200 to almost 6,000.

Numerous factors, including economic factors and political uncertainty, as well as the performance of stocks and sectors, can weigh heavily on a stock market index.

The US will face issues on all these fronts over the next six months, so it’s unlikely that we will have a better handle on its direction until early 2025.

FAQs