Wall Street's most optimistic forecast! Wells Fargo: Trump's policies combined with interest rate cuts are favorable, aiming for 7,000 points for the S&P 500 by the end of next year

The most optimistic prediction for the U.S. stock market next year has emerged from Wall Street. On Tuesday local time, Wells Fargo's Christopher Harvey stock strategy team released their 2025 market outlook report, predicting that the S&P 500 index will rise to 7,007 points by the end of 2025, which is the highest target among Wall Street strategists tracked by Yahoo Finance. As of Tuesday's close, the S&P 500 index stood at 6,049.9 points, making Wells Fargo's forecast 15.8% higher than the current level. Wells Fargo's target price is only 7 points higher than the predictions from Deutsche Bank and Yardeni Research, both of which expect the S&P 500 index to rise to 7,000 points in 2025. The Harvey team wrote in their outlook: “Overall, we expect that the Trump administration's policies and the Federal Reserve's gradual interest rate cuts will create an increasingly favorable macro environment for the stock market.” “In short, the stock market will continue to rise.” The report also predicts that expanding corporate profit margins, U.S. economic growth exceeding the current general expectation of 2.1%, and “a slight boost from a recovery in merger and acquisition activity by the end of 2025” all indicate that the U.S. stock market will rise. In terms of sectors, the Harvey team recommends focusing on cyclical stocks, stating that cyclical stocks will be “catalyzed by accelerating GDP and regulatory environment,” and expects the market rebound to continue expanding from the “seven giants” to the other 493 components of the S&P 500 index. The report also noted that, considering concerns about the heated bullish sentiment, high stock valuations, and already robust economic growth, they initially wanted to “lean towards contrarian investing.” However, “the data does not support” a weak performance or decline in the S&P index this year. The Harvey team wrote: “2025 is likely to be a solid or even strong year.”