Investing.com — Analysts at Goldman Sachs say in a recent note that the S&P 500 is expected to rise 11% in 2025 on strong earnings growth, but the rate of increase will slow after a strong performance in 2024. He said he expected the growth rate to slow down.
GS expects the stock to rise 11% to 6,500 points this year, compared to a return of about 25% in 2024.
The majority of the index’s returns are driven by five stocks: NVIDIA Corporation (NASDAQ:), Apple Inc (NASDAQ:), Amazon.com Inc (NASDAQ:), Alphabet Inc (NASDAQ:), and Broadcom Inc (NASDAQ:). It was towed. GS analysts noted that the similarly weighted S&P 500 index rose 13% in 2024.
GS also pointed out that the last time the S&P 500 posted consecutive annual gains of more than 20% was in 1998 and 1999, just before the dot-com bubble burst.
The index is expected to rise primarily due to improved earnings, with GS projecting EPS growth of 11% in 2025 and 7% in 2026. Furthermore, the forward price/earnings ratio (PER) is expected to remain unchanged at 21.5 times by the end of 2025.
The S&P 500 got off to a sluggish start to 2025, with losses widening from December as investors locked in some gains from 2024. Uncertainty surrounding U.S. interest rates and policy under President-elect Donald Trump also weighed on risk appetite, particularly the outlook for domestic equities.
The communications services sector was the S&P 500’s biggest booster in 2024, as hype around artificial intelligence drove heavy technology stocks higher. This trend is expected to slow slightly in 2025, as investors seek greater clarity on how much AI is factored into corporate earnings.
Tech stocks fared better than the S&P 500 in 2024, rising about 29%.
