Wall Street expects stocks to rise by this much in 2025

The Key Takeaways

• The S&P 500 is expected to rise roughly 10% next year, according to a FactSet analysis of analyst estimates.
• In four out of five recent years (including 2024), analysts have undervalued the index.
• Analysts have overestimated this index more than once in the last 20 years.

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

The average analyst estimate points to the S&P 500 finishing 2025 at just a bit over 6,679, suggesting that the index will rise about 10% in the next calendar year based on Thursday’s close, according to a report from FactSet Research analyst John Butters. Since its inception in 1957, the S&P 500 has returned 10.23% a year on average.

Butters found also that Wall Street analysts undervalued the market in 2024. The consensus at the end of 2023 was that the S&P 500 would end this year at near 5,132, more than 15% below its current level. In four out of the last five years, analysts have undervalued stock prices.

However, over the long term, that streak of underestimation hasn't been the norm. Wall Street has overestimated the S&P 500's annual return in 13 of the last 20 years; on average, over the past two decades, the consensus has been too high by about 7%.

Wall Street is optimistic about corporate profits and the U.S. Economy. Morgan Stanley (MS) and Goldman Sachs (GS) have forecast the S&P 500 will rise to 6,500 next year as earnings growth accelerates for a broad swath of the index.

A survey conducted by financial advisors last month revealed that two thirds expected the index would rise at least 10% this year. But many cautioned against the possibility of volatility.

The S&P 500 is on track to gain more than 20% for a second consecutive year, which hasn’t happened since the 1990s. By Thursday evening, the index’s gain was 26.9%. The Dow Jones Industrial Average grew by 16.5% during the same period. Meanwhile, the Nasdaq Composite soared 32.6%.

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