Two Strategists Who Accurately Forecasted the Previous Year's Bull Market Anticipate its Persistence in 2025. Their Predicted S&P 500 Value Might Surprise You.
In 2024, many financial experts expressed doubts about the market's ability to continue its upward trajectory following a strong 2023. Inflation remained high, and the Federal Reserve hadn't indicated plans to decrease interest rates. Estimates for the S&P 500 ranged from 4,200 to 5,400.
However, these predictions proved off-target as the S&P 500 concluded the year at 5,881, reaching 6,000 multiple times and setting 57 new highs throughout the year. Two strategists, Ed Yardeni and Tom Lee, distinguished themselves by accurately predicting the market's bull run in 2024.
Predicting the Future of the S&P 500
Yardeni took the lead in 2024 with an optimistic prediction of 5,400 for the S&P 500, a high estimate at the time. He articulated his confidence in the Fed lowering interest rates between three and four times, and midway through the year, he adjusted his forecast to 5,800.
On the other hand, Lee, too, had made an accurate prediction of the market's rally in 2023. He initially predicted the S&P 500 would reach 5,200 during 2024. However, doubling down on his bullish outlook, Lee upgraded his prediction to 6,000 by October.
Post their impressive 2024 performance, both Yardeni and Lee have remained confident in the stock market's prospects for 2025. They believe the S&P 500 could surge another 19% from its current levels (as of Jan. 3), which projects the index to soar past 7,000. A survey of 21 Wall Street analysts suggests an even more ambitious median end-of-year price target of over 6,600 for 2025.
Bullish on 7,000: When Will It Happen?
Although both strategists have a bullish outlook on the S&P 500 reaching 7,000, they have different timelines for when this milestone will be achieved. Yardeni, for instance, anticipates that the market might hit the 7,000-mark by the end of 2025 if President-elect Donald Trump's promises of widespread tariffs don't materialize.
Yardeni bases his bullish prediction on a belief in a productivity boom fueled by 21st-century innovations, particularly in the fields of robotics and artificial intelligence. This growth isn't reliant on further interest rate cuts, as Yardeni sees inflation under control at this point.
Lee, on the other hand, is more aggressively optimistic in the near term. He even suggests that the S&P 500 could approach 7,000 within the first six months of 2025, as he believes concerns about inflation are overstated, and the Fed will ultimately take a more dovish stance than investors anticipate.
However, Lee becomes less bullish in the second half of the year, estimating a market pullback that will culminate in an end-of-year 6,600 finish.
Cut Some Slack for the Prognosticators
It's essential to bear in mind that market strategists wrestle with an inherently challenging task: predicting the future. Investors should approach price targets with a grain of salt, as these experts are not infallible. Their primary goal is to provide valuable insight and inform decision-making, so it's crucial to maintain perspective when their predictions are off the mark.
It's also noteworthy that Yardeni and Lee are generally bullish in their outlook, with Yardeni predicting an eventual 10,000-mark for the S&P 500 by the end of the decade. Lee has previously suggested a lofty target of 15,000.
While these predictions might materialize, investors should focus on the long-term trajectory of the S&P 500, as it has historically shown a strong tendency to grow over time, whether the market is experiencing a bull run or a bear market.
Regarding my personal perspective, I remain more cautious about the market's near-term prospects. Investors are sensitive to unfavorable information, which is all but impossible to avoid for an entire year. However, Lee and Yardeni's forecasts have proven to be accurate so far, so it's essential to credit their insights.
Strategists like Yardeni and Lee, who accurately predicted the market's performance in 2024, are also optimistic about the S&P 500 in 2025. They believe the index could surge past 7,000, with Yardeni projecting an end-of-year price of around 7,000, provided President-elect Trump's tariff promises do not materialize. Lee, on the other hand, suggests the S&P 500 could approach 7,000 within the first half of 2025, but anticipates a market pullback in the second half, resulting in an end-of-year price of 6,600. However, it's crucial to remember that market strategists' predictions are not infallible and should be approached with caution. Despite their bullish outlooks, they have proposed more ambitious targets for the S&P 500 in the long term, with Yardeni aiming for a 10,000-mark by the end of the decade and Lee suggesting a lofty target of 15,000.
