Goldman Sachs and Morgan Stanley predict the S&P 500 will Hit 6,500 by the end of 2025, based on confidence in the US economy and corporates' ability to perform. This forecast implies a more than 10% increase from the current level of 5,893.62. The two firms argue that solid growth in various sectors is the key reason for such optimism about growth prospects.

Goldman forecasts an 11% increase in corporate earnings by 2025, based on an estimated 2.5% real GDP. As for key performers, it points out the so-called "Magnificent 7" Amazon (AMZN, Financial), Apple (AAPL, Financial), Alphabet (GOOG, Financial), Meta (META, Financial), Microsoft (MSFT, Financial), Nvidia (NVDA, Financial), and Tesla (TSLA, Financial); at the same time, the authors notice that the specific outperformance of these firms relative to the other members of the S&P 500 may decline to the minimum in seven years.

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However, to point out some concerns, the investment bank anticipates that margins will expand amid the stronger demand for AI and semiconductors and some risk factors, such as the rise in tariffs and bond yields. On the other hand, positive elements might be fiscal policy changes or an easier Federal Reserve monetary policy.

Morgan Stanley is on the same page here, stating that further earnings estimates upside is expected to match the Fed's expected rate cuts. There is consensus that macroeconomic factors influence growth, but caution has been deemed necessary due to factors such as inflationary effects via recent policies after Trump's re-election.

The forecasts provide a somewhat positive outlook for the US equity market but also highlight the interdependence between business earnings and macroeconomic factors as we approach the year 2025.

This article first appeared on GuruFocus.