S&P 500 Outlook 2025

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Questions and Answers

What factor is expected to drive S&P 500 gains into 2025 according to Wall Street analysts?

President-elect Donald Trump's pro-growth policies.

How much did the S&P 500 rise in market value this year, contributing to its strong performance?

Around $5.8 trillion.

What is the forecasted earnings rise for the S&P 500 in the final quarter of the year?

9.8%.

What is Sam Stovall's end-of-year 2025 price target for the S&P 500?

<p>6,585 points.</p> Signup and view all the answers

What investment trends were reported by Bank of America's Flow Show regarding U.S. stock funds?

<p>U.S. stock funds gathered $55.8 billion in new money last week.</p> Signup and view all the answers

What current valuation is the S&P 500 trading at, and how does it compare to its five-year average?

<p>The S&amp;P 500 is trading at around 22.6 times the 12-month earnings forecast, which is above the five-year average of approximately 20.7.</p> Signup and view all the answers

What historical trend has been noted regarding market volatility in the first year of presidential terms since 1949?

<p>Nearly 90% of first years of presidential terms have seen declines in excess of 5%, averaging 17.5%.</p> Signup and view all the answers

What does the CBOE Group's VIX index represent, and what is its current level?

<p>The VIX index represents implied volatility from option trading tied to the S&amp;P 500, and its current level is $17.09.</p> Signup and view all the answers

How much did the VIX decrease after President-elect Trump's victory, and what was the market response?

<p>The VIX fell over 20% after Trump's decisive victory, leading to a surge in stock investments.</p> Signup and view all the answers

What projected daily price swings does the current VIX suggest for the S&P 500 over the next 30 days?

<p>The current VIX suggests daily price swings of around 1.07%, or approximately 63 points, for the S&amp;P 500.</p> Signup and view all the answers

Flashcards

S&P 500 Bull Run

The S&P 500 is projected to continue rising for a third year, driven by President-elect Trump's policies and other factors.

Increased Volatility

Investors are expected to experience higher fluctuations in the stock market due to the incoming Trump administration.

Strong Corporate Earnings

Third-quarter profits for the S&P 500 companies have increased and are expected to rise further next quarter.

Projected Growth (2025)

U.S. economic growth is predicted to increase by 2.5% next year, supported by factors including strong consumer spending and a resilient labor market.

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Investor Confidence (Trump)

Global investors are bullish on the incoming Trump's administration, investing heavily in U.S. assets, driven by potential tax cuts and relaxed regulations.

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S&P 500 Valuation

The S&P 500 index is currently trading at 22.6 times its 12-month earnings forecast. This is above its historical average of 20.7, suggesting a potentially high valuation.

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S&P 500 Performance (2016-2017)

The S&P 500 has seen double-digit gains for the past two years and has risen over 66% since the current bull market began in October 2022.

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Market Volatility (Trump's First Year)

The VIX index, a measure of market volatility, is likely to increase in the first year of a new administration (like Trump's).

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VIX Index

The CBOE Volatility Index (VIX) is a measure of implied volatility based on S&P 500 options trading, representing the market's expectations of future price swings.

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Post-Election Volatility

The VIX initially spiked before the election, reflecting investor fear and uncertainty. However, Trump's decisive win reduced this volatility.

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S&P 500 Outlook

The S&P 500 is projected to continue its rise in 2025, fueled by factors like strong corporate earnings and a positive economic outlook.

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Trump's Economic Policies

President-elect Trump's policies are expected to boost the S&P 500, potentially leading to further gains.

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Market Volatility

Despite potential for gains, investors should brace for greater fluctuations in the stock market due to the incoming administration's policies.

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Earnings Growth

Corporate earnings for the S&P 500 companies are projected to rise significantly in 2025, signaling strong economic performance.

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Investor Sentiment

Global investors are optimistic about Trump's policies and are investing heavily in U.S. assets, pushing the S&P 500 higher.

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What is the S&P 500's current valuation?

The S&P 500 is currently trading at 22.6 times its 12-month earnings forecast, which is higher than its 5-year average of 20.7.

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What is the VIX?

The CBOE Volatility Index (VIX) is a measure of implied volatility based on S&P 500 options trading, representing the market's expectations of future price swings.

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How does the VIX impact the market?

A higher VIX indicates greater expected volatility, suggesting larger potential price swings in the S&P 500.

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What are the implications of the election on the VIX?

The VIX surged leading up to the election due to uncertainty, but dropped after Trump's win as investors felt more confident.

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What is the projected volatility for Trump's first year?

The VIX is expected to rise in Trump's first year, suggesting increased market volatility, potentially driven by new policy changes.

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Study Notes

S&P 500 Outlook

  • S&P 500 projected to extend bull run into 2025, but heightened volatility expected due to the Trump administration's policies.
  • S&P 500 has risen over 25% this year, increasing market value by $5.8 trillion. This surge is partly due to tech stock gains and Fed's interest rate cuts.
  • Corporate earnings for the S&P 500's third quarter increased by 8.8% to $527.4 billion; projected to increase another 9.8% in the final quarter.
  • Analysts forecast a 14.1% increase in S&P 500 earnings next year, reaching $275 per share, potentially driven by corporate tax cuts and relaxed regulations.
  • US economy forecast to grow by 2.5% next year, bolstered by a strong labor market and resilient consumer spending.
  • Global investors are heavily invested in U.S. assets, evident in the record influx of $55.8 billion into U.S. stock funds last week—the highest since March.

Analyst Projections

  • CFRA's Sam Stovall raised S&P 500's end-of-year 2025 target to 6,585 points, anticipating an 11% increase and $5 trillion in added market value.
  • Stovall's projection factors in 2.4% projected real GDP growth and 13% growth in S&P 500 operating earnings.
  • However, the current valuation of the S&P 500 (22.6 times 12-month earnings) is above its five-year average (20.7).
  • The S&P 500 has seen double-digit gains in the past two years and a 66% increase since the 2022 bull market began.
  • Projected increased volatility (VIX) is expected due to the upcoming presidential inauguration. Historical data show nearly 90% of presidential first-year terms since 1949 experienced declines exceeding 5%, averaging a 17.5% decrease.
  • Current VIX (fear gauge) level of 17.09 suggests daily price swings of around 1.07% or 63 points for the S&P 500 over the next 30 days.

Investor Sentiment

  • Post-election, investor fears subsided as the VIX decreased by over 20% as investors rushed back to stocks following President-elect Trump's decisive victory.

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