Goldman Sachs predicts S&P 500 will rise by 7% in 2025 due to economic optimism

From Investing.com: 2024-12-15 22:56:20

Goldman Sachs analysts predict the S&P 500 will continue its bull market into 2025 due to economic optimism and expectations of looser regulations under President Trump. They anticipate a 7% increase to 6,500 points by the end of 2025. Investor optimism has led to a rise in U.S. equity positioning, particularly in cyclical stocks.

The bank notes that the market is already pricing in real GDP growth above 3%, with technology and consumer discretionary stocks driving recent gains. Stretched valuations pose a risk, with stock valuations at their highest levels since the late 1990s tech bubble. Low equity option implied volatility has allowed for increased positioning in futures and options.

Deal-making activity is expected to rise by 25% in the coming year, fueled by looser financial conditions, reduced regulations under Trump, and increased CEO confidence. Trump’s appointment of Andrew Ferguson as FTC Chair signals a friendlier stance towards M&A activity while maintaining antitrust pressure on tech firms. Expansionary policies and reduced regulatory scrutiny on AI and cryptocurrencies are expected under Trump.

However, a potential risk of Trump’s presidency is heightened inflation due to protectionist trade policies. Trump’s pledge to impose import tariffs on China could spark a renewed trade war. Despite investor optimism, it remains to be seen if this will translate into sustained market gains.



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