Another potential upside target is the 161.8% Fibonacci extension of the October 2023 low to the March 2024 high bull run, extended higher from the April 2024 low, which comes in at 24,103.45. It represents a near 7% rise from current levels (as of the daily close made at the end of June 2025).
Earnings growth drives bullish sentiment
Analysts anticipate S&P 500 earnings per share (EPS) to grow by approximately 14.8% in 2025, supporting higher index valuations. This robust earnings growth expectation provides fundamental justification for the bullish price targets being set by major investment banks.
The earnings growth projection reflects expectations of continued economic expansion, margin improvement from operational efficiency gains, and revenue growth across multiple sectors beyond just technology.
Corporate profit margins have remained resilient despite cost pressures, with companies demonstrating pricing power and operational leverage that supports expanding profitability even in a moderating growth environment.
The quality of earnings growth, with broad-based participation across sectors rather than concentration in a few high-growth areas, provides additional confidence in the sustainability of current valuation levels.
Federal Reserve policy remains critical factor
The Federal Reserve’s (Fed) stance on interest rates remains a critical factor, with potential rate cuts influencing market dynamics. Current expectations suggest that the Fed may be cutting rates twice later in 2025 if inflation continues to moderate and economic growth shows signs of slowing.
Lower interest rates would provide support for equity valuations by reducing the discount rate applied to future cash flows and making bonds less attractive relative to stocks for income-seeking investors.
However, the path of monetary policy remains data-dependent, with the Fed balancing the need to prevent economic overheating against the risk of tightening too aggressively and triggering a recession.
Market sensitivity to Fed communications and economic data releases suggests that any deviation from expected policy paths could significantly impact the achievement of year-end targets for both indices.
Geopolitical and economic risk factors
Developments such as trade policies and international tensions could impact investor sentiment and market performance. The ongoing evolution of US-China trade relationships, European economic stability, and Middle Eastern geopolitical tensions all represent potential headwinds, even if investors expect these to have died down for the time being.
Trade policy developments, particularly any changes to tariff structures or international economic agreements, could affect corporate earnings and investor confidence in ways that might challenge current bullish projections.
Global economic coordination and central bank policies beyond the Fed will also influence capital flows and relative attractiveness of US equities compared to international alternatives.
Corporate earnings in sectors exposed to international markets could face pressure from currency fluctuations, trade disruptions, or changes in global demand patterns that might affect the broad-based earnings growth assumptions underlying current targets.
Investment implications and trading considerations
For investors looking to position themselves around these Wall Street projections, several approaches merit consideration given the generally bullish but varied target ranges.
- Research the fundamental drivers behind analyst projections, including earnings expectations, monetary policy assumptions, and economic growth forecasts.
- Consider how different scenarios might affect your portfolio allocation and risk management strategies.
- Open an account with IG by visiting our website and completing the application process.
- Access US equity markets through our platform, including both S&P 500 and Nasdaq 100 exposure.
- Implement appropriate diversification and risk management given the potential volatility around economic and policy developments.
CFD trading and spread betting provide flexible approaches for gaining exposure to US equity index movements, allowing positions on both rising and falling markets.
For those with longer-term investment horizons who believe in the structural growth story of US equities, direct exposure through index funds or individual stocks may be appropriate.
In summary, while forecasts vary, the consensus among major investment banks points toward a positive trajectory for both the S&P 500 and Nasdaq 100 by the end of 2025, underpinned by strong corporate earnings and supportive economic policies.
The achievement of these- sometimes ambitious – targets will depend on the continued execution of corporate earnings growth, favourable monetary policy developments, and the absence of a resurgence of major geopolitical or economic shocks that could derail the current positive momentum in US equity markets.