How Much Higher Could They Go In 2025?

Topline

Anticipated earnings reports from the world’s largest stocks boosted the S&P 500 and Nasdaq to new all-time highs Monday, marking the latest records for both indexes in recent weeks, though one analyst warned investor optimism might be short-lived as others say AI firms could propel the rally even more.

One analyst warned of “intense investor FOMO” as stocks exploited “continued good news.”

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Key Facts

The S&P increased by more than 0.6% on Monday afternoon to a record intraday high of 6,336, while the Nasdaq rose up to nearly 0.8% to an intraday record of 21,077 before both indexes pared gains back slightly.

Both indexes benefitted from increases among the “Magnificent Seven,” including Alphabet (up 2.3%), Amazon (1.2%) and Apple (1%), adding to other rallying stocks like Verizon (4.8%), Qualcomm (3%) and Broadcom (1.8%).

Goldman Sachs wrote in a note earlier this month the S&P will likely increase another 4% to about 6,600 by the end of the year, just above a 2.5% rally to 6,500 forecast by Morgan Stanley analysts, while other economists for JPMorgan Chase anticipate the index dropping about 5.3% to around 6,000.

Wells Fargo Securities’ chief U.S. equity strategist Christopher Harvey gave one of the most bullish forecasts in an interview with Bloomberg, claiming he sees the S&P ending the year at 7,007—an 11% increase over Friday’s closing price just below 6,300 amid a “real secular trend in AI that will continue.”

Julian Emanuel, chief equity strategist at Evercore ISI, offered a lower forecast in a note over the weekend: The S&P will likely decline up to 15% in the coming months and end the year near 5,600.

A recent bull market featured a “period of intense investor FOMO,” Emanuel wrote, arguing stocks have “overdiscounted the potential for continued good news” as any upcoming “good news on the tariff front” and positive economic data, like better-than-expected retail sales, has already influenced stock prices.

Big Number

5.4%. That’s the consensus estimate for how much analysts expect the S&P to grow by the end of the year, according to FactSet, bringing the index to 6,678.

Crucial Quote

“The S&P is not the same as it was 25 years ago,” Harvey said. “It is much stronger, the fundamentals are much better today than they were back then.” Stocks under the index—including “Magnificent Seven” members Nvidia, Microsoft, Amazon, Apple and Meta—are “more growthy, more techy” and have improved productivity and management, Harvey noted, arguing tech stocks will continue to boost the index as more companies report Q2 earnings. Harvey said he expects stocks to sustain President Donald Trump’s continued tariff threats, as Trump will likely pull back on his harsher ideas: “We had seen Trump 1.0,” he said, “We know his style—it’s to go out to the nth degree and then to come back in.”

Contra

The expected 12-month price-to-earnings ratio for the S&P is 22.2, above a five-year average of 19.9 and a 10-year average of 18.4, according to FactSet. The ratio—dividing a company’s stock price by its earnings per share—is a signal of investor optimism as they pay more for a company’s stock while expecting more profits. The average ratio ranges from 16 to 20, according to Charles Schwab, meaning a ratio of 22.2 implies stocks may be slightly overvalued by investors.

What To Expect From “magnificent Seven” Earnings

Alphabet and Tesla will be the first of the “Magnificent Seven” to release Q2 earnings reports, with both companies reporting after the bell Wednesday. Alphabet is expected to report revenue just over $93.9 billion, while analysts forecast $22.4 billion in revenue for Tesla, according to a Dow Jones consensus. The “Magnificent Seven” are expected to complement higher-than-expected earnings reports by companies listed under the S&P in recent weeks: 83% of firms to release Q2 earnings as of Friday reported earnings nearly 8% above estimates. “Magnificent Seven” firms will likely post earnings growth of 14% through the second quarter, while the remaining 493 companies under the S&P will report growth of just 3.5%, according to FactSet.

Tangent

Shares of Tesla and Nvidia lagged behind other “Magnificent Seven” stocks Monday, decreasing by 0.3% and 0.1%, respectively, as of around 3:10 p.m. EDT.

Key Background

The S&P and Nasdaq have risen to record highs in recent months in the wake of Trump’s wide-reaching tariffs pulling down both indexes. The indexes have benefited from the growth of AI-backed companies like Nvidia, which rose to a record-high share price earlier this month while becoming the first firm to hit a $4 trillion market cap. Broader investor optimism appeared to be sustained by recent economic data, including second-quarter earnings, retail sales and jobless claims, each of which surpassed analyst expectations. Consumer confidence also rose to a five-month high in July as spenders expressed less worry about inflation, despite inflation jumping above estimates to 2.7% in June.