2025 has arrived. What are Wall Street's major institutions predicting for the new year? Let's get straight to the point:

U.S. Stocks: The Bull Market Continues, but Lower Returns Expected

Pretty much every institution warns investors not to expect another year of equity returns topping 20%, as was the case in recent years. However, many investment banks agree the U.S. bull market will persist, driven by increased AI adoption and expanding corporate earnings.

JPMorgan Chase:  Our 2025 S&P 500 price target is 6,500, with EPS at $270 (+10% year-over-year). Further rate easing should support a broader earnings recovery within the S&P 500 and across market caps. The central equity theme is higher dispersion across stocks, styles, sectors, and themes, driven by unsynchronized regional business cycles, central bank policies, the evolving policy agenda of the new U.S. administration, and broadening earnings growth.

JPMorgan also remains overweight on Japanese equities, citing benefits from domestic reflation, improving real wage growth, accelerating buybacks, and continued corporate reforms.

Goldman Sachs:  The decade of big S&P 500 gains is over. Goldman notes that as investors shift toward other assets, including bonds, for better returns, U.S. equities are unlikely to sustain their above-average performance from the past decade. The bank forecasts a nominal annualized total return of just 3% for the S&P 500 over the next decade, compared to 13% in the past decade and an 11% long-term average.

Deutsche Bank: Expects strong economic growth, rate cuts in Europe and the U.S., and stabilizing inflation to be largely priced in already. Combined with high valuations, extraordinary performance in 2025 will be challenging unless additional positive catalysts emerge.

BNY Mellon:  Following resilient earnings growth in 2024, we see this trend continuing, with S&P 500 earnings growing between 10-15% in 2025. Our year-end S&P 500 target is 6,600, suggesting continued positive, albeit more muted, returns compared to 2024.

U.S. Bonds: Limited Opportunities Amid Persistent High Yields

Several institutions caution that 2025 might not be a year of the bond, given the Federal Reserve's reduced rate cut expectations and increased U.S. government bond issuance under Trump 2.0.  

Schroders: The old-fashioned reason for owning bonds—to generate income—is back.  

Goldman Sachs:  Bonds, particularly non-U.S. bonds, could offer some protection against risks from a U.S.-China trade war 2.0. TIPS (Treasury Inflation-Protected Securities) may provide a good hedge for portfolios.

AXA Investment Managers:  For short and intermediate maturities, the bond market looks healthy. Yields are fairly valued given the rate outlook, making duration shocks like those in 2022-2023 less likely.

Pictet Asset Management: U.S. Treasury yields are expected to fall slightly, from 4.4% to 4.3%, with the Fed lowering rates to 4.25%. Real yields are forecast at a positive 2.1%.

Commodities: Diverging Outlooks on Gold and Oil

Bank of America: Commodity prices are set to rise, with base and precious metals leading the way. We forecast copper prices to increase by 17% and gold to hit $3,000 per ounce. However, oil prices are likely to decline, with Brent crude averaging $65 per barrel, down 20% from 2024.

Citi: Remain bullish on precious metals, as countries fearing sanctions under Trump will diversify away from the dollar. Gold is one of the few viable alternatives.

JPMorgan Chase: Weak oil supply-demand fundamentals and Trump's energy agenda will likely push oil prices lower. We remain bearish on base metals due to China tariff risks but hold a long-term bullish outlook on gold.

Macquarie: Despite an oversupplied oil market, we see room for volatility. WTI crude is forecast to average $66 per barrel, slightly above $65.

Global Economy: Cautious Optimism Amid Rate Cuts

Lower interest rates and pro-growth policies should support modest global economic expansion, with the U.S. leading the way. However, risks—especially from the unpredictable U.S. administration—cannot be ignored.

Bank of America: We forecast a Goldilocks scenario for 2025: global GDP growth at 3.25%, inflation at 2.5%, further monetary easing, and large fiscal deficits. The U.S. will see a 'soft landing' with 2.5% GDP growth, while China achieves 4.5%.

BlackRock Investment Institute: We remain pro-risk, favoring U.S. equities due to stronger growth and the ability to capitalize on mega-trends like AI. We expect the AI theme to broaden out, boosting sectors across the board.

Inflation: Contained but Not Eliminated

Trump's trade barriers and aggressive immigration policies could fuel inflation, challenging the Federal Reserve's efforts to meet its target.

Citi: We expect tariffs, tax cut extensions, immigration restrictions, and deregulation to drive moderately higher U.S. inflation without significantly impacting growth.

TD Securities: Tariffs and immigration policies could add nearly 1 percentage point to inflation by early 2026, weighing on growth and impacting monetary policy. The labor market will soften, with the unemployment rate peaking at 4.4% in 2025.

Artificial Intelligence: The Mainstay of Growth

AI remains a cornerstone of productivity and investment, offering opportunities across industries.

BNY Mellon:  We expect AI to continue driving profit margin improvements and earnings growth. Its impact will surpass technologies like the internet, mobile phones, and the cloud, benefiting industries beyond tech.

Wells Fargo Investment Institute:  The AI theme is broadening, impacting sectors such as industrial equipment, energy infrastructure, and materials. We see long-term investment opportunities in building the infrastructure for an AI-driven world. 

Conclusion

Wall Street remains cautiously optimistic for 2025, with key themes centered on moderation in equities, stabilization in bonds, divergence in commodities, and continued growth fueled by AI.