Brokerage HSBC said on Friday it expects the S&P 500 index to hit 6,700 by the end of 2025, on the back of robust corporate earnings growth and a resilient U.S. economy.
The brokerage’s current forecast implies an upside of about 10.3% to the index’s last close of 6,075.11.
“We expect next year’s equity returns to be focused on earnings growth as valuations are more stretched,” HSBC analysts led by Nicole Inui wrote in a note. “Overall, we expect earnings to grow by 9% incorporating a slower but still resilient U.S. economy and some margin expansion.”
The benchmark index has had a good run this year, having gained close to 28% so far, broadly boosted by the so-called ‘Magnificent 7’ stocks on the artificial intelligence boom.
A resilient macroeconomic backdrop, continued earnings growth, and gradual easing in inflation also further supported the index.
The sequence and timing of the U.S. Federal Reserve’s monetary policy changes, inflation levels, and elevated valuations will be key topics for the equity market going into 2025, HSBC said.
The brokerage projected the Fed to cut by a further 125 basis points (bps) by the end of 2025, including a 25 bps cut this month.
