Investing.com -- Oppenheimer has initiated a price target for the S&P 500, forecasting a climb to 7,100 by year-end 2025. This new target represents a 16.7% increase from last Friday's close of 6,090 and a 14.52% rise from Oppenheimer's current year-end target of 6,200 for 2024.
The new target, Oppenheimer notes, is based on factors such as current monetary policy, resilient economic growth, business activity, consumer behavior, and job creation.
The investment bank expects earnings to grow by 10% to $275 for the S&P 500 in 2025, up from the projected $250 for 2024. This earnings projection supports a forward price-to-earnings (PE) multiple of 25.8x.
According to Oppenheimer strategists, the fundamentals indicate a potential for equities to rise from current levels, bolstered by increasing private investor interest across various demographic groups.
The firm’s outlook suggests that equities remain an essential tool for investors with traditional needs-based investing goals – from growing retirement assets and maintaining standards of living to funding education and creating family legacies.
“History suggests that equities can be a resource for building assets, providing for example dividend income and hedging against inflation over intermediate and long time periods,” strategists led by John Stoltzfus said in a Monday note.
Since hitting lows on October 27, 2023, the broadening market, along with sector rebalancing and rotation, indicates a strong bull market that is expected to continue through 2025. The quality of economic and job growth data since the Federal Reserve's rate hike cycle began in March 2022, and subsequent rate cuts, provide further support for this outlook.
In addition to fundamental factors, Oppenheimer highlights AI technology as a pivotal advancement that could parallel the impact of the automobile in the 1920s.
“In the equity markets companies in all eleven sectors could benefit from improved productivity via AI to further serve the needs of business and customers,” strategists noted.
“We’re not suggesting paradise on earth nor are we expecting a “Goldilocks world” but rather a genuine potential for AI to provide greater efficiencies in key areas that are challenging progress today across the sectors and society,” they added.
Oppenheimer points out information technology, communication services, consumer discretionary, financials, and industrials as their preferred sectors. They also anticipate that small- and mid-cap stocks may see more sustained rallies as the Fed proceeds with interest rate cuts.