Wall Street's most bullish strategist: Strong US economic growth will push the S&P 500 to 7,000 by next year
1min read Bankim Chadha, Deutsche Bank, said the S&P 500 index will reach 7,000 by the end of next year, making him the most bullish Wall Street strategist on further US stock market gains.
His target is the highest among all strategists tracked by institutions, meaning the index will soar 17 per cent from current levels. The forecast is far above his peers at Goldman and Morgan Stanley, who recently raised their expectations to 6,500 by the end of 2025.
The S&P 500 has surged more than 25 per cent this year, on track for a second year of more than 20 per cent returns — a feat that has happened only four times in the past 100 years. The benchmark has hit record highs on resilient economies, easing inflation and expected Fed policy easing, driven by tech giants. Chadha has been bullish on US stocks all year and has raised his target several times.
“We expect the strong momentum to continue into 2025, with earnings growth remaining in the low double digits,” Chadha and his team wrote in a note on Monday.
Chadha said he expects S&P 500 companies to post 11 per cent earnings growth in 2024, to $253 a share, in line with typical growth outside a recession. By 2025, this could rise to $282. But he added that if global economic growth recovers to the top of its historical range, earnings growth could rise to 17 per cent, taking S&P earnings to a high of $295 a share.
The US stock market’s two-year boom has created a huge valuation gap with the rest of the world, with the S&P 500 currently trading at about 24 times forward earnings. This is a new high since the pandemic, and close to the record set during the tech bubble. But Chadha said the high valuations are justified, and the gap could widen further, citing above-trend earnings growth and dividend payouts over the past decade. Growing buybacks and equity flows have also supported the market.
While Mr Trump’s policies could have both positive and negative effects on growth, the order of events will be key, the strategist said, likening it to his first term, when tax cuts and deregulation came first, followed by tariffs, and adding that growth could still be the top priority.
“We believe all aspects of the economic cycle will come to pass,” Chadha wrote, citing factors including a shift from destocking to restocking, a rebound in capital spending outside of the tech sector and a manufacturing recovery, which also points to rising consumer and business confidence and a rebound in capital markets and M&A activity.