Will the Stock Market Crash or Soar in 2025? Wall Street Has a Definitive Answer.

The S&P 500 (SNPINDEX: ^GSPC) advanced 23% last year as investors cheered economic resilience and potential productivity gains from artificial intelligence. Admittedly, the index faltered in December as bond yields soared and the Federal Reserve signaled fewer interest rate cuts than anticipated in 2025.

However, the S&P 500 has regained its momentum, climbing nearly 3% year to date as of Jan. 29. And despite historically high valuations, most Wall Street analysts expect the stock market to continue moving higher in the remaining months of the year.

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Here's what investors should know.

Most Wall Street analysts anticipate strong returns in 2025

Shown below are year-end targets for the S&P 500 in 2025 set by various Wall Street banks and research firms. The chart also shows the implied upside or downside from the index's current level of 6,039. The list is by no means comprehensive, but most analysts expect the S&P 500 to move higher.

Data source: Yahoo Finance, TheStreet.

As shown, most Wall Street analysts think the S&P 500 is headed higher in 2025. The median year-end target is 6,600, which implies 9% upside from its current level of 6,039. It also implies 12% upside from where the index started the year. That is slightly higher than the average annual return in the past decade.

Alternatively, we can aggregate the median target price estimate on every stock in the S&P 500 to build a bottom-up forecast. Currently, based on over 12,000 ratings on individual stocks, that method gives the S&P 500 a year-end target of 6,753. That implies 12% upside from its current level.

So, Wall Street definitively expects another strong year for the US. stock market. But investors should always view forecasts with skepticism. Analysts frequently miss the mark by a wide margin. For instance, the S&P 500 had a median target of 5,100 in 2024, but finished the year 15% higher at 5,882. And the index had a median target of 5,000 in 2022, but finished the year 23% lower at 3,840.

Wall Street expects S&P 500 companies to report faster revenue and earnings growth in 2025

Wall Street's bullish outlook is encouraging. But how the S&P 500 performs in the remaining months of 2025 ultimately depends on investor sentiment and corporate financial results, which are heavily influenced by macroeconomic indicators like gross domestic product (GDP), inflation, and interest rates.

The Blue Chip Survey, which averages forecasts from about 50 economists, shows GDP is projected to grow 2.1% in 2025, while inflation cools to 2.4%. And CME Group's FedWatch tool, which estimates the probability of future interest rates based on futures contracts, shows two quarter-point rate cuts is the most likely scenario in 2025.

Meanwhile, S&P 500 companies in aggregate are forecast to report revenue growth of 5.8% this year, up from 5.1% last year. And earnings are expected to increase 14.8% in 2025, an acceleration from 9.4% in 2024, according to FactSet Research. Also, analysts expect quality earnings growth, meaning higher revenue and profit margins will be the drivers, not stock buybacks.

Any revisions to those estimates could cause volatility, and volatility cuts both ways. If sticky inflation forces the Federal Reserve to cut interest rates more slowly than anticipated, the S&P 500 could suffer a correction or even a bear market. Alternatively, if companies report stronger-than-expected earnings, the stock market may produce better-than-expected returns.

Unfortunately, despite Wall Street's optimism, it is impossible to know whether the stock market will soar or crash in 2025. However, history says investors that patiently hold good stocks for long periods will be well rewarded over time.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America, FactSet Research Systems, Goldman Sachs Group, and JPMorgan Chase. The Motley Fool recommends Barclays Plc and CME Group. The Motley Fool has a disclosure policy.