Wells Fargo Investment Institute believes that the U.S. economy may be stronger in 2025, and coupled with Trump's policy changes in his second term, will provide support for the S&P 500 index and continue to be bullish on market performance in 2025.
Wells Fargo strategists expect the S&P 500 to reach a target range of 6,500-6,700 by the end of 2025, an increase from the previous forecast of 6,200-6,400. The adjustment makes Wells Fargo one of the most optimistic companies on the S&P 500 among major Wall Street institutions. According to the latest forecast, the 2025 index target is nearly 12% higher than Wednesday's closing price.
Wells Fargo expects strong economic growth and rising corporate profitability to drive the performance of the S&P 500. "We forecast stronger economic growth, along with policies aimed at reducing regulatory costs, will drive S&P 500 earnings per share to $275 by the end of 2025, up from our previous forecast of $270," Wells Fargo's strategy team said in a client note on Wednesday.
The team also noted that the Trump administration's likely reduction in regulations would provide additional support for earnings growth. In addition, corporate tax cuts are also a possibility, although the specific timing and scale remain uncertain. Strategists believe that Trump's policy of emphasizing tariffs and domestically produced goods may benefit domestic companies whose business is mainly concentrated in the United States.
While investors are betting that Trump's policies could strengthen the economy and businesses by cutting taxes, raising tariffs and cutting financial regulations, they could also lead to larger fiscal deficits and a pickup in inflation, which would weigh on U.S. Treasuries and push up interest rates.
Based on this, Wells Fargo expects long-term interest rates to rise in 2025, especially driven by economic improvement and potential inflation. Strategists raised their targets for 10-year Treasury and 30-year Treasury yields by 50 basis points in 2025 to 4.50%-5.00% and 4.75%-5.25%, respectively. This will further steepen the yield curve, consistent with the optimistic outlook for medium-term fixed income.
Wells Fargo provided a table listing targets for the U.S. economy and key asset classes at the end of 2025, showing a positive view of future economic conditions and policy changes. Strategists expect additional inflation to likely emerge by the end of 2025 as economic growth accelerates.
Wells Fargo's optimistic forecast is consistent with the views of other major Wall Street institutions such as Morgan Stanley, Goldman Sachs and Yardeni Research, which are also bullish on the stock market in 2025.
Article forwarded from: Jinshi Data