The S&P 500’s (^GSPC) surge to record highs since Donald Trump won the 2024 presidential election shows no signs of letting up.
And Wall Street strategists quickly updated their outlook on where the stock could go.
On Monday, Ed Yardeni, president of Yardeni Research, wrote in a letter to clients that he expects the S&P 500 to reach 6,100 by the end of 2024, about 2% above current levels.
Yardeni then expects the index to reach 7,000 by the end of 2025, 8,000 by the end of 2026 and 10,000 by the end of this decade. Yardeni previously told Yahoo Finance that he saw the S&P 500 reaching 8,000 by the end of the decade.
“We are just seeing the emergence of a more pro-business administration that will undoubtedly lower taxes,” Yardeni told Yahoo Finance. “And not just for companies, but also for individuals. Many different types of tax cuts have been discussed. And there is also a lot of deregulation.”
In his note, Yardeni wrote that the market is showing the first signs that animal spirits are coming into play.
Key to Yardeni’s call is a boost to his earnings estimates and margin projections for the S&P 500 as a result of Trump’s policies. The earnings estimates assume that Trump “will quickly cut the corporate tax rate from 21% to 15%.”
Yardeni’s forecast at the end of the decade would yield a return of about 66% from current levels, or about 11% annualized, which is roughly equivalent to the long-term average annual return of the S&P 500.
There are concerns, such as persistent inflation data, that could prompt investors to wonder whether the Federal Reserve will stop cutting interest rates.
And others, like the Goldman Sachs team—which recently called for a 3% annual return for the S&P 500 over the next decade—reasoned that the bull market will eventually turn into a bear.
“We are not saying that a recession cannot happen for the rest of the decade,” Yardeni wrote in his letter to clients. “We note, however, that despite the significant tightening of monetary policy over the period 2022 to 2024, no recession has occurred. Why would there be a recession for the remainder of the turbulent 2020s?”
Research from FactSet on Friday showed that the S&P 500 is already trading at 22.2 times 2025 earnings estimates. This is above the five-year average of 19.6 and the 20-year average of 15.8.
High valuations and frothy sentiment are among the reasons why some argue that the market could see a correction, or at least more modest returns, in the future.
But strategists often point out that high valuations in themselves are often not a reason to sell. “Multiples are likely to rise as investors believe earnings can grow faster for longer because a recession is less likely in the near future,” Yardeni wrote.
