The stock market rally of 2024 shows no signs of slowing down in the new year, according to Citi. The bank set a 6,500 target for the S & P 500 for 2025 as its base case. Citi’s forecast equates to a 6.7% increase for the broad market index from Friday’s close. Citi listed tailwinds from artificial intelligence, the continued expectation of an economic soft landing as well as President-elect Donald Trump’s incoming administration as potential catalysts for stocks heading into next year. “We remain constructive on S & P 500 fundamentals given ongoing earnings resiliency and the flexibility that has come with strong free cash flow generation post pandemic,” strategist Scott Chronert wrote. “Additionally, we are comfortable that the S & P 500 can continue to trade expensive relative to history in the near- to medium-term given the underlying growth trajectory and macro backdrop. It’s mostly a matter of degree.” .SPX YTD mountain The S & P 500 is on pace to add more than 20% for the second-straight year. Citi’s bull case has the S & P 500 scaling to 6,900, while its bear case calls for a pullback to 5,100. The former implies upside of 13.3%, while the latter calls for a 16.3% decrease. Chronert also forecast earnings growth of more than 13% for S & P 500 companies in 2025. To be sure, Chronert noted that he expects market volatility to increase next year, and added that some uncertainty still lingers concerning what Trump’s policies will mean for Wall Street once he assumes office in January. Wall Street has largely cheered Trump’s looming return to the White House, with stocks soaring to record-highs following the election . “At this point we still do not have sufficient Trump policy information to build into our fundamental framework with any confidence. Previous work showed that tariffs are likely to create a drag to earnings,” Chronert said. “However, we need to allow for both uncertainty and opportunity. Our instinct is that policy effects will ultimately prove only marginal to consensus.” “We believe post-election euphoria reflects confidence in longer-term growth drivers, but our structurally positive view on S & P 500 fundamentals does have a myriad of issues that need to be navigated,” he added. Citi’s call comes as all three major indexes are on pace to end the year higher, with the S & P 500 in particular set to notch its second-consecutive annual gain of more than 20%. The broad market index has advanced 27% in 2024, while the Nasdaq Composite and Dow Jones Industrial Average are up 32% and 18%.
Citigroup sets 6,500 target for S&P 500 in 2025