FX168 Financial News Agency (North America) News: The outlook for the USA economy looks very optimistic. Inflation is decreasing, productivity is increasing, and the Federal Reserve is easing monetary policy, which should provide a boost to economic growth. Economists have shifted from discussing the possibility of a recession to predicting the potential for a 'soft'But after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.or 'no landing' scenario. It seems that this debate is only about the pace of economic growth thereafter. #MarketOutlook for the second half of 2024#

However, the outlook for the stock market is not as clear, with major Wall Street banks holding differing opinions on whether stock prices still have room to rise further.

Currently, the stock market is trading near historic highs, and the S&P 500 index is poised to achieve annual gains of over 20% for two consecutive years.

Among the top analysts on Wall Street, there is some disagreement regarding whether all the good news has already been priced in or if the market can continue to rise on already high valuations.

On one hand, most analysts believe that the market will continue to rise, overcoming election uncertainty, and continue to drive stocks higher before 2025. However, beyond this timeframe, uncertainty increases, and the outlook becomes more unclear.

Here is Wall Street's outlook for the stock market in 2025 and beyond.

Bulls

A series of Wall Street banks are chasing this year's stock market record rebound, raising their year-end price targets for the S&P 500 index to catch up.

UBS Group's strategist raised the price target for the S&P 500 in a report last week, expecting the S&P 500 to reach 6300 points by June 2025, and 6600 points by the end of next year.

These represent 8% and 13% potential upside, respectively.

David Lefkowitz, Chief Investment Officer and Head of U.S. Equities at UBS, said that healthy profit growth will pave the way for further stock gains.

"The third-quarter earnings season has started on a positive note, with bank management teams emphasizing that consumer spending remains healthy and consistent with normal economic growth," Lefkowitz said.

The bank stated that improved inflation, more Fed rate cuts, and accelerated investments in artificial intelligence will all support the stock market next year.

Strong growth will lead to more growth, which is also a key reason why BMO strategist Brian Belski is bullish on the stock market in 2025.

Belsky raised its year-end s&p 500 price target from 5600 points to 6100 points, making it one of the most bullish strategists on Wall Street.

"We continue to be surprised by the strong market gains and have once again decided to take bolder measures than incremental adjustments," Belsky pointed out in the report.

He is also encouraged by the broad-based stock market rebound, as the market is no longer concentrated on a few tech giants. This is a healthy sign for sustainable stock market growth.

"This is a trend we expect to continue, even as the price and fundamentals of Mag-X stocks slow down in the coming months, which should also help support future market gains," Belsky stated.

Bears

Wall Street's bearish strategists, after being incorrect in their annual forecasts, still hold onto their views. They are most concerned about the possibility of fewer rate cuts than expected and the potential disappointment in the hype around artificial intelligence.

JPMorgan's strategist sticks to its s&p 500 year-end price target of 4200 points, representing a potential 28% decline from the current level.

In a report earlier this month, JPMorgan strategist Dubravko Lakos-Bujas acknowledged that the recession no longer seems to be a concern, but suggested that AI investments are unlikely to yield returns due to continued uncertainty over monetization issues.

Furthermore, if the economy remains strong, investors' expectations of the Fed's upcoming rate cut may be dampened, which will limit the Fed's ability to cut rates and may exert downward pressure on stock prices.

Finally, in a report on Monday, JPMorgan warned that third-quarter profit forecasts have already seen a wave of downgrades, with sell-side analysts lowering expectations.

"The extent of profit downgrades is significant," JPMorgan stated, adding that "the situation seems to be deteriorating."

Strategist Barry Bannister of Stifel warned investors that there may be a stock market crash in 2025.

High valuations, unrealistic expectations of further Fed rate cuts, and the hype around artificial intelligence that ultimately failed to materialize, may create a perfect storm for stock price declines next year.

"We've taken a close look at the stock market, and the response we've got is the same 'shaking head' expression. Despite prevailing optimism about a soft landing and Fed rate cuts, the S&P 500 has nearly risen by 40%, but this clearly has exceeded expectations," Bannister said.

While the strategist acknowledges that the market may experience 'frenzy' and drive stock prices further up, he notes that this will eventually peak and then fall again.

"Certainly, we can carefully select and apply the most overvalued cyclical adjustment valuation levels of the past 35 years to show an additional 10% increase, but the same analysis of a century of frenzy indicates that by 2025, the S&P 500 will return to the levels of 2024 (a 26% drop from the expected peak)," Bannister said.

Neutral viewpoint.

Goldman Sachs strategist David Kostin holds a bullish short-term view.

The bank's chief stock strategist recently raised its year-end S&P 500 price target to 6000 points, expecting further growth in company earnings.

"The main driver behind our upward revision of earnings per share forecast for 2025 is the expanded profit margins," Kostin said. "The macro environment continues to favor moderate profit margin expansion, with pricing growth exceeding the growth in input costs."

However, Kostin also believes that the golden age of stock market returns may have come to an end.

In a weekend report, Kostin released his 10-year forecast for the stock market. He stated that the combination of extreme market concentration and high valuations suggests that the annualized return of the S&P 500 over the next 10 years may be only 3%. In contrast, the annualized return of the S&P 500 over the past 10 years was around 13%.

"Investors should prepare for lower end of typical performance distribution for stock market returns for the next decade, which may lag behind bonds and inflation," Kostin stated.

Goldman Sachs also believes that the stock market's performance relative to other assets over the next decade will face challenges. The bank stated that there is about a 72% chance that the S&P 500 may underperform bond market returns and a 33% chance of underperforming inflation until 2034.

His long-term view aligns with other putters, as they are concerned that the performance in the next ten years will be far inferior to the past ten years. Steiffel's Benniste also put forward the theory of a "lost decade" in the stock market.