Here comes Wall Street's 2025 outlook for stocks 🚨

'We are maintaining a wider than normal bull versus bear case skew' 😳

(Photo by petr sidorov on Unsplash)

It’s that time of year again: Wall Street’s research departments are publishing their comprehensive outlooks for the markets in 2025.

Morgan Stanley’s Michael Wilson is out front with an arguably moderate forecast. In his base case scenario, he sees the S&P 500 ending 2025 at 6,500. That represents a roughly 10% gain from current levels, which would be in line with historical averages. This assumes earnings per share (EPS) grow from $239 in 2024 to $271 in 2025 and 12% to $303.

“A healthy mix of mid- single-digit revenue growth (in line with our economists’ nominal GDP growth expectations) and margin expansion drives our 2025 and 2026 EPS growth forecasts of 13% and 12%, respectively,” he wrote in a 59-page report. “While it’s been predominantly a cost cutting and efficiency gains story to date, more companies are participating in the earnings recovery (~60% of S&P 500 companies have positive EPS growth today versus ~50% in 1Q 2023). We expect this broadening in earnings growth to continue as the Fed cuts rates into next year and business cycle indicators continue to improve.”

Wilson’s target reflects a 21.5 price-to-earnings (P/E) multiple. This is arguably high, especially when you consider how conservative he’s been regarding multiples recently.