Heading into 2024, many strategists doubted the market’s ability to keep moving higher after a strong 2023. Inflation was still high, and the Federal Reserve had not yet indicated it would cut interest rates. Estimates for the broader benchmark S&P 500 (^GSPC 0.16%) ranged from 4,200 to 5,400.
Those turned out to be wrong, and the S&P 500 ended the year at 5,881 after topping 6,000 numerous times and making 57 all-time highs during the year. Most market strategists failed to predict the market’s bull run in 2024, but two nailed it with their calls. These same strategists think the party can continue in 2025, and their price target for the S&P 500 may shock you.
Will the S&P 500 reach 7,000?
Ed Yardeni of Yardeni Research and Tom Lee of Fundstrat won with their calls in 2024. Yardeni entered 2024 with the high call on the Street of 5,400. Nobody knew the market would go as high as it did, but he accurately predicted the Fed would cut interest rates three to four times, and he hiked his S&P 500 full-year price target midway through the year to 5,800.
Heading into 2024, Lee, who also correctly predicted the rally of 2023, predicted the S&P 500 would hit 5,200. But by January, he was already saying his target might be too conservative. By October, Lee was calling for the market to hit 6,000.
After big years and plenty of recognition for their calls, Lee and Yardeni have been pounding the table on stocks in 2025. Both think the market could jump another 19% from current levels (as of Jan. 3) and send the S&P 500 to 7,000.
Wouldn’t that be something? Most analysts, who have spent the last two years missing the mark, are ready to follow Yardeni and Lee. One survey of 21 Wall Street analysts suggests a median year-end price target of over 6,600 in 2025.
Although Yardeni and Lee are both bullish, they expect the market to reach 7,000 at different times of the year. In late November, Yardeni said that although there are risks and the market could get bumpy if President-elect Donald Trump makes good on his promise of widespread tariffs, he sees the market reaching 7,000 by year-end.
Yardeni isn’t basing his thesis on further rate cuts, as he thinks the Fed may be done lowering rates because inflation is under control. Rather, he believes the U.S. economy is in the midst of a productivity boom spurred by all the technological innovations in the 21st century, including robotics and artificial intelligence.
Lee is making an even more aggressive call, at least in the near term, suggesting the S&P 500 could close in on 7,000 within the first six months of 2025. He thinks inflation worries are overblown and that the Fed will ultimately be more dovish than investors expect.
What’s more, he sees markets and the decision-makers at public companies turning bullish during a pro-business Trump administration, all of which could turn into powerful tailwinds and awaken animal spirits. Lee is less bullish in the back half of the year, predicting the market pulling back and eventually ending at 6,600.
Cut the prognosticators some slack
When it comes to price targets, investors need to remember that predicting the future is not easy, especially in the stock market. Market strategists are some of the brightest investing minds in the world, but their job is difficult. You shouldn’t expect them to be right all the time. Give them some slack when they miss the mark.
I wouldn’t read too much into one-year calls. And Yardeni and Lee are perma-bulls, meaning they are typically optimistic about the market. Yardeni thinks the S&P 500 will hit 10,000 by the end of the decade, while Lee has previously suggested 15,000.
Their predictions may come true. However, the only thing investors should count on is the S&P 500 moving higher over the long term, so if your investing horizon is five, 10, or 20 years out, you can stay the course.
I’m more cautious about the market in the near term, primarily because I think investors will be touchy about bad news, which is tough to avoid for an entire year. So far, though, Lee and Yardeni have been right, so give credit where credit is due.
