Wells Fargo Investment Institute (Wells Fargo Investment Institute) believes that the US economy may be stronger in 2025. Coupled with policy changes during Trump's second term, it will support the S&P 500 index and continue to boost market performance in 2025.

Wells Fargo strategists expect the S&P 500 index to reach the target range of 6,500-6,700 points by the end of 2025, up from 6,200-6,400 points previously predicted. This adjustment made Wells Fargo one of the major Wall Street institutions with the most optimistic predictions for the S&P 500. According to the latest forecast, the 2025 index target is nearly 12% higher than Wednesday's closing price.

Wells Fargo anticipates that strong economic growth and increased corporate profitability will drive the performance of the S&P 500 index. “We anticipate stronger economic growth and policies aimed at reducing regulatory costs will drive S&P 500 earnings per share to reach $275 by the end of 2025, higher than the previous forecast of $270,” the strategy team said in a client report on Wednesday.

The team also notes that the Trump administration's likely reduced regulatory policies will provide additional support for profit growth. Furthermore, although the exact timing and scale are uncertain, corporate tax cuts are also a possibility. The strategist believes that Trump's policy of emphasizing tariffs and locally produced goods may benefit local companies whose business is mainly concentrated in the US.

While investors are betting that Trump's policies may strengthen the economy and businesses by cutting taxes, increasing tariffs, and reducing financial regulations, these policies may also cause the fiscal deficit to rise and inflation to rise, thereby affecting US Treasury bonds and driving up interest rates.

Based on this, Wells Fargo expects long-term interest rates to rise in 2025, particularly driven by economic improvements and potential inflation. The strategist raised the target yield for the 2025 10-year treasury bonds and 30-year treasury bonds by 50 basis points to 4.50%-5.00% and 4.75%-5.25%, respectively. This would make the yield curve steeper, in line with an optimistic outlook for medium term fixed income.

Wells Fargo provided a table showing the goals for the US economy and key asset classes at the end of 2025, showing a positive view of future economic conditions and policy changes. Strategists expect additional inflation by the end of 2025 as economic growth accelerates.

Wells Fargo's optimistic forecast is in line with the views of other major Wall Street institutions such as Morgan Stanley, Goldman Sachs, and Yardeni Research, which are also bullish on the 2025 stock market.

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