Here’s how much Wall Street expects stocks to rise in 2025

• The S&P 500 is expected to rise about 10% next year, according to a FactSet analysis of analyst estimates.

• Analysts have underestimated the index in four of the past five years, including 2024.

• However, over the past two decades, analysts have overestimated the index more often than not.

After two years of double-digit stock returns, Wall Street thinks the S&P 500 is capable of a threepeat.

According to a report from FactSet Research analyst John Butters, the average analyst estimate points to the S&P 500 ending at just over 6,679 in 2025, suggesting the index will rise about 10% over the next calendar year based on its closing price from Thursday. Since its inception in 1957, the S&P 500 has returned an average of 10.23% per year.

Butters also found that Wall Street analysts had dramatically underestimated the market in 2024. The consensus at the end of 2023 was that the S&P 500 would end this year at almost 5,132, more than 15% below current levels. Analysts have underestimated the stock in four of the past five years.

In the long run, however, this series of underestimations has not been the norm. Wall Street has overestimated the annual return of the S&P 500 in thirteen of the past twenty years; On average, the consensus has been too high by about 7% over the past twenty years.

The report underlines optimism on Wall Street about the strength of the US economy and corporate profits. Morgan Stanley (MADAM) and Goldman Sachs (GS) predict the S&P 500 will rise to 6,500 next year as earnings growth accelerates for a broad swath of the index.

In a survey of financial advisers published last month, two-thirds said they expected the index to rise by at least 10% next year, but many warned the market could experience some volatility.

The S&P 500 is on track to gain more than 20% for the second year in a row, which hasn’t happened since the 1990s. As of Thursday’s close, the index had risen 26.9% since the beginning of the year. The Dow Jones Industrial Average rose 16.5% and the Nasdaq Composite rose about 32.6% over the same period.

Read the original article on Investopedia