Expecting Significant Gains: S&P 500 Poised for 20% Growth Post-Election
The S&P 500 (NYSEARCA: SPY) is showing strong upward movement, especially following the results of the 2024 elections. Market indicators suggest a potential increase of 20%, which could bring the index to 7,400. This optimistic forecast is not just a single projection; it stems from multiple analyses that converge on this target. One key comparison is with the COVID-19 market surge. After a dramatic drop during the early pandemic, the S&P 500 rebounded, ultimately more than doubling in value over the next year, driven by supportive monetary policies and stimulus spending that still affect the economy today.
U.S. Economic Growth Fuels Stock Market Confidence
Despite some slowdown in recent months, the U.S. economy continues to grow and supports earnings for the S&P 500. Labor market data shows a cooling trend; however, it remains healthy compared to pre-COVID numbers, suggesting sustainable growth. A strong job market is crucial for the stock market, as billions are continuously invested from retirement accounts every month. Moreover, the U.S. labor force has reached record participation levels, providing significant support for stock prices.
With Donald Trump returning to the presidency, expectations for a healthier labor market may rise, which could enhance GDP growth and increase S&P 500 earnings. Overall, forecasts for S&P 500 earnings look solid across various sectors, with a projected acceleration to double-digit growth anticipated for both Q4 and into 2025.
Tech Giants Set to Propel S&P 500 in 2025
Numerous factors influence the stock market as it moves into 2024 and beyond, with the dominance of big tech and artificial intelligence being the most significant. The six largest companies in the S&P 500 contribute over 30% of the index’s total value, and analysts predict they will report double-digit growth next year. Even though current price targets lag behind market dynamics, upward revisions are becoming more common, and a 30% gain is anticipated for these key players.
Tech leaders like NVIDIA (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), and Meta Platforms (NASDAQ: META) are forecasted to experience a 35% increase from early November price levels, with projections likely rising over the coming year. These companies are significantly investing in data centers, cloud services, and AI, realizing a strong return on these investments. The favorable environment created by declining interest rates and a pro-business administration also suggests that these gains may continue well beyond 2025.
Steady Capital Return Growth Supports Stock Market Performance
The growth in capital returns—dividends and stock buybacks—helps sustain the current rise in the stock market. In 2024, the S&P 500 has achieved a mid-single-digit growth rate in capital returns, with expectations for continued growth into 2025. Goldman Sachs (NYSE: GS) estimates that total capital returns could surpass $1 trillion and keep increasing. This forecast appears cautious, given the ongoing economic adjustments. However, as headwinds lessen and favorable conditions develop, the S&P 500 may experience a noticeable increase in capital return growth by late 2025.
A critical insight for today’s investors is drawn from the COVID-19 bubble, which initially pushed the S&P 500 to a peak near 4,800, contributing 2,600 points. This serves as the first projection, indicating a potential rise to 7,400 if the previous trading range is broken. The second projection stems from the post-pandemic market correction, where the index dropped nearly 30%, establishing a strong support range at 5,500. The current upward trajectory suggests a possible advance of another 1,300 points, reinforcing the potential to reach 7,400 if the critical point at 6,100 is surpassed.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
