Wall Street’s 2025 forecasts for the S&P 500 suggest the index will maintain its upward momentum over the next 12 months, but artificial intelligence (AI) is no longer the centerpiece of these predictions. This marks a shift from the AI-driven rally that characterized market calls since Nvidia’s groundbreaking earnings report in early 2023 sparked a bullish surge.
Broader Market Trends Emerge
BMO Capital Markets’ chief investment strategist Brian Belski recently set a 2025 year-end target of 6,700 for the S&P 500, while Morgan Stanley’s chief investment officer Mike Wilson issued a 12-month target of 6,500. Notably, both strategists have moved away from heavy reliance on AI as a primary driver of stock market gains. Instead, they are focusing on a broader rally that extends beyond the tech sector.
Wilson highlighted expectations for continued broadening of earnings growth, supported by anticipated Federal Reserve rate cuts and improving business cycle indicators. Similarly, Belski pointed to data showing an increasing number of stocks outperforming the S&P 500, with 276 stocks doing so in the second half of 2024—a significant improvement over the 10-year average of 238.
A Matured Bull Market
This broader rally may lead to slightly weaker overall gains for the index compared to recent years, as smaller gains in non-tech companies contribute less to the index’s total growth. Historical analysis by Belski shows that when the top 100 stocks in the S&P 500 outperform, the index delivers an average annual return of 11.8%, compared to 8% when those stocks underperform.
While this suggests the rally may appear less dramatic than the AI-driven surge of 2023 and 2024, strategists believe the market remains positioned for solid growth.
AI’s Continued Role in Market Outlook
Although AI is no longer a dominant theme in baseline forecasts, its potential impact has not been dismissed entirely. Evercore ISI’s Julian Emanuel recently projected the S&P 500 could reach 6,600 by mid-2025, fueled by renewed public speculation and optimism around AI. Wilson also presented a bullish scenario in which widespread AI adoption boosts corporate margins, potentially pushing the index toward 7,400.
The Bigger Picture
Wall Street’s evolving market narrative reflects growing confidence in a diversified rally driven by improving economic fundamentals. While AI remains a promising catalyst, strategists believe the market can sustain its upward trajectory without relying solely on it. Whether AI continues to lead or takes a backseat, the outlook for investors remains optimistic.
Source : Swifteradio.com
