S&P 500 Forecast 2025: Will the Bull Market Continue?

As of mid-May 2025, the S&P 500 has proven remarkably resilient, outperforming many expectations amid global uncertainties. The index has recovered significantly from the volatility experienced in the second half of 2024, gaining over 5% in just the past week, and showing a year-to-date (YTD) increase of approximately 11.2%.

This renewed strength in the benchmark index has come from robust first-quarter earnings from major companies such as Apple, Microsoft, and Alphabet, combined with improving investor sentiment as inflation shows signs of continued moderation.

Therefore, this performance has reignited discussions about the bull market's longevity. However, what do experts think about their revamped S&P 500 Forecast for 2025?

S&P 500 Current Overview

As mentioned, the S&P 500's recent rally resulted from robust corporate earnings. Approximately 92% of S&P 500 companies have reported their earnings, with 78% surpassing EPS expectations. Forward earnings growth stands at 13.6% for the quarter. However, the forward price-to-earnings (P/E) ratio has surged to 21.5, surpassing its five-year average, indicating potential overvaluation.

Despite these concerns, market optimism remains, with no recession anticipated. The easing of trade tensions and strong earnings have also contributed to this positive outlook.

Factors Influencing the Market

Several key factors are influencing the S&P 500's trajectory:

• Earnings Growth: Analysts predict S&P 500 earnings per share (EPS) growth to accelerate to 14% year-over-year in 2025.

• Valuation Concerns: The forward 12-month P/E ratio is 20.2, above the 5-year average of 19.9 and the 10-year average of 18.3, suggesting that stocks may be overvalued.

• Economic Indicators: Despite deteriorating economic sentiment, data paints a more optimistic picture, with low jobless claims and wages outpacing inflation.

• Trade Policies: The recent easing of trade tensions under President Trump has reduced recession fears, contributing to market optimism

S&P 500 Forecast 2025: Expert Insights

Analysts have provided varied forecasts for the S&P 500's performance by the end of 2025:

• Wells Fargo Securities maintains a bullish target of 7,007, citing resilient economic fundamentals and expected Federal Reserve interest-rate cuts.

• Bank of America suggests that U.S. stocks could rally by 17% over the next year, provided a recession does not materialise.

• Goldman Sachs projects the S&P 500 to rise to 6,500 by the end of 2025, a 9% price gain from its current level.

However, some firms have revised their forecasts downward due to emerging risks:

• Oppenheimer reduced its 2025 S&P 500 forecast from 7,100 to 5,950.

• Yardeni Research cut its target from 7,000 to 6,000.

• Goldman Sachs also revised its estimate from 6,500 to 5,700.

S&P 500 vs Gold in 2025

While the S&P 500 has climbed steadily in 2025, gold prices have been comparatively stagnant. After hitting record highs above $2,400 per ounce in March 2025 amid geopolitical concerns and central bank buying, gold has since pulled back to the $2,290–$2,320 range.

Gold's earlier momentum was driven by:

• Central banks (particularly in China and India) are increasing their gold reserves.

• Market fear over a potential U.S. recession and dollar debasement.

• Continued conflict in the Middle East and parts of Eastern Europe.

However, with the diminishing likelihood of a deep recession in the U.S. and strong economic data, risk appetite has returned, pushing capital back into equities. As a result, gold's performance has begun to underperform relative to risk assets like the S&P 500.

• Gold YTD performance as of May 2025: approximately +6.8%

• S&P 500 YTD performance as of May 2025: approximately +11.2%

Investors seeking capital appreciation prefer equities over gold as a defensive, store-of-value asset. However, some long-term holders still allocate a portion of their portfolio to gold as a hedge against inflation and systemic risk.

S&P 500 vs Other Major Index Funds

Let's compare the S&P 500's 2025 performance to other key U.S. and global index funds:

NASDAQ-100 (NDX)

The NASDAQ-100 has outpaced the S&P 500 in 2025, returning approximately +13.9% YTD due to the resurgence in big tech stocks. As interest rate cut expectations solidified, capital rotated heavily into growth and innovation stocks.

However, some analysts warn that tech-heavy indices like the NASDAQ may face increased regulatory scrutiny and sector-specific volatility in the second half of 2025, especially if AI stocks show signs of speculative excess.

Dow Jones Industrial Average (DJIA)

The Dow Jones has lagged behind the S&P 500 and the NASDAQ, with a YTD return of approximately +6.3%. As a more value-oriented index, the Dow hasn't benefited from the renewed interest in growth stocks and faces structural challenges due to its price-weighted composition.

Russell 2000 (Small-Cap Index)

Small-cap stocks in the Russell 2000 have seen a moderate rebound in 2025, with YTD gains of +8.1%. However, concerns about access to credit and profitability in a high-interest-rate environment have limited enthusiasm for small caps, especially in comparison to mega-cap tech.

Conclusion

In conclusion, the S&P 500's current momentum in 2025 reflects optimism about corporate health, monetary policy, and the broader economy. Compared to gold and other major indices, the S&P remains a balanced bet for long-term investors, offering a blend of growth and stability.

However, investors should remain vigilant about valuation risks and geopolitical developments. While the bull market has shown resilience, potential headwinds such as overvaluation and economic uncertainties could shift investments rapidly in the second half of 2025.

Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.