Wall Street strategists are entering 2025 with high expectations, driven by forecasts of stronger-than-expected economic growth and widespread stock market gains. Institutions like Wells Fargo, Bank of America, and Deutsche Bank are all aligning their projections around an optimistic outlook, citing key economic indicators and historical patterns as evidence of a potential breakout year for equities.
At the center of this bullish outlook is anticipated U.S. GDP growth. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, emphasizes that economists have consistently underestimated the strength of the economy in recent years. This trend, a reversal of pre-pandemic overestimations, suggests room for further surprises on the upside. “Given that history recently of underestimating [U.S. economic growth] and the fact that GDP forecasts for next year are creeping up very, very, very slowly, I’m making a bet on the 2% to 3% [growth] instead of the 1% to 2%,” said Calvasina (Schafer, 2024). Notably, historical data supports this optimism—since 1947, when GDP has grown between 2.1% and 3%, stock markets have risen 70% of the time, with average gains of nearly 11%.
Wells Fargo is leading the charge with one of the most optimistic targets on Wall Street, setting a year-end S&P 500 projection of 7,007, representing a potential gain of over 26% from current levels. Christopher Harvey, Wells Fargo’s equity strategist, ties this outlook to the expectation of a “cyclical opportunity catalyzed by upward GDP revisions” (Schafer, 2024). Supporting this narrative, Wells Fargo predicts that easing Federal Reserve policies, including potential rate cuts, and a favorable regulatory environment will fuel economic expansion and corporate growth.
The anticipated economic backdrop is not only influencing market projections but also shaping sector strategies. Bank of America’s economics team forecasts U.S. economic growth at an annualized rate of 2.4% in 2025, exceeding Bloomberg’s consensus estimate of 2.1%. This has led their strategy team to recommend overweight positions in GDP-sensitive sectors such as Financials, Consumer Discretionary, Materials, Real Estate, and Utilities. According to Savita Subramanian, the firm’s equity strategist, “We see more opportunities in stocks than the index. In particular, we like companies with healthy cash return prospects and a tether to the U.S. economy: large cap Value stocks” (Schafer, 2024).
The market narrative for 2025 also signals a shift in leadership. While 2024 was dominated by tech giants—the so-called “Magnificent Seven”—analysts are predicting a broader market rally that benefits the other 493 members of the S&P 500. This expectation aligns with projections for strong performance from the equal-weighted S&P 500 index, reflecting a move away from concentrated market gains.
However, strategists remain mindful of potential risks, including high valuations and overly bullish market sentiment. Christopher Harvey acknowledged these concerns but concluded that the data overwhelmingly supports a positive outlook for 2025. Beyond basic economic growth, increased corporate activity, such as mergers and acquisitions, is expected to play a significant role in driving market gains later in the year.
The shift in focus from artificial intelligence, which drove much of the market narrative in 2024, to GDP as the primary driver reflects an evolving market dynamic. Savvy investors are likely to focus on active management strategies, targeting individual stocks over index-level gains to capture outsized returns.
In essence, Wall Street’s 2025 outlook combines optimism about the U.S. economy’s resilience with confidence in corporate growth and market adaptability. As strategists look to historical patterns and macroeconomic trends, the upcoming year is shaping up to deliver not only a strong economy but also thriving markets, offering opportunities for a wide range of investors.
Sources
Dale, Oliver. “Wall Street’s 2025 Outlook Strategists Predict Strong Economic Growth Market Gains.” MoneyCheck, 4 Dec. 2024, https://moneycheck.com/wall-streets-2025-outlook-strategists-predict-strong-economic-growth-market-gains/.
Schafer, Josh. “Wall Street Is Betting on a Strong US Economy in 2025.” Yahoo Finance, 4 Dec. 2024, https://finance.yahoo.com/news/wall-street-is-betting-on-a-strong-us-economy-in-2025-morning-brief-110022378.html.
Commentaires