Wall Street analysts, giddy with the prospect of a regulation-burning and business-friendly administration under President-elect Donald Trump, see further gains well into the coming year as well, as the two year bull market gallops into 2025 and beyond.
🚨Don’t Miss this amazing Black Friday move! Get 60% off TheStreet Pro. Act now before it’s gone 😲
Deutsche Bank analyst Bankim Chadha threw down Wall Street's furthest S&P 500 marker in a note published earlier this week, pegging his end-2025 price target at 7,000 points, a level that would suggest another 16.25% gain from Friday's close.
Chadha and his team see "steady robust momentum continuing into 2025, with earnings-per-share growth in the low double digits." They forecast collective profits of $282 a share, $7 ahead of Wall Street's $275 consensus.
"We see various aspects of the cycle still to come, including a move from de- to restocking; a pickup in [capital spending] outside tech; a manufacturing recovery; rises in consumer and corporate confidence; a recovery in capital markets and M&A activity; a pickup in loan growth; and rest of the world growth," Chadha and his team predicted in an outline that largely resembles Wall Street's lofty expectations for 2025 stock performance.
Threading that needle will be a complicated task, however, for a Trump administration that could be in conflict with the Fed, in trade wars with its largest partners, and mired in legal challenges to some of its key policy objectives tied to immigration and tariffs.
Risks to Wall Street's bullish outlook
While the economy is riding solid momentum into year-end, it is also susceptible to a pullback in government spending, as Trump has promised, and to a weakening labor market, which could add to concern that the recession risk it's been able to avoid for the past four years could soon resurface.
The merger boom that banks are forecasting could also take time to develop, given that regulatory changes to the financial sector will take time to come into force and could face resistance in a Congress that will be controlled by only narrow Republican majorities.
Big takeover deals could also be thwarted by the market's historically high valuations, which continue to suggest the need for a near-term correction should earnings in any of the upcoming quarters fall short of Wall Street's forecasts.