What to expect from the US stock market in 2025

• Wall Street analysts generally expect stocks to post another year of gains in 2025, as a strong economy and low interest rates boost corporate earnings.

• The gap between Magnificent Seven and the rest of the market is expected to narrow as more companies begin to reap the benefits of AI.

• Small- and mid-cap stocks could do well next year thanks to lower interest rates, as well as an easier regulatory environment under incoming President Donald Trump.

• However, some analysts warn that market volatility may increase after Trump returns to the White House amid uncertainty about how his policy approach will impact the economy.

Stocks have had a great year, and Wall Street is optimistic that US stocks will continue to rise in 2025.

The S&P 500 rose 23% in 2024 after rising 24% the previous year, the first two-year stretch of returns of more than 20% since the late 1990s. Gains are not expected to be strong in 2025, but market watchers say the outlook is generally positive.

Here’s some of what analysts say you can expect from the stock market next year.

Corporate profits are expected to be the main driver of stock returns in 2025.

Earnings growth has been tight over the past two years. Rising spending on artificial intelligence and a slew of cost cuts have helped the big tech’s profits soar. Meanwhile, the S&P 493 – or the S&P 500 without the Magnificent Seven – saw earnings shrink in 2024, although JPMorgan analysts expect the group to post double-digit earnings growth in 2025.

The Magnificent Seven’s overall earnings growth is still expected to outpace the rest of the index, albeit by a slim margin in seven years, according to Goldman Sachs forecasts.

That’s one reason why equity analysts at Bank of America expect the equal-weighted S&P 500 to outperform its capitalization-weighted counterpart.

Artificial intelligence has been one of the biggest buzzwords on Wall Street for more than two years, and analysts see that trend continuing.

“We see the build and adoption of AI creating opportunities across sectors,” BlackRock analysts wrote in their 2025 outlook.

Goldman analysts have similar expectations. They say the AI ​​craze has gone through “two phases”: “The first phase” focused solely on Nvidia (NVDA), whose advanced chips have made it a key enabler of the AI ​​boom; The “second phase” was a bit more broad and included companies that were needed to build the AI ​​infrastructure.

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