When the S&P 500 (SPY) pulled back by 2.73% in the final trading month of 2024, it still returned 23.3% for the year. This is the second straight year of gains for passive ETF investors. Wall Street strategists believe that the rate of such gains will slow this year.
BMO Capital Markets is expecting a more normalized return environment. That would imply better returns in the broader sector. For example, the bond, housing, energy, and resource markets did not perform well last year. The firm set a 6,700 target for the S&P 500.
The median target for the S&P 500 is 6,600 or a 12% gain from current levels. Oppenheimer has a 7,100 target.
Magnificent seven firms like Apple (AAPL), Alphabet (GOOGL), and Nvidia (NVDA) lifted the markets in the last two years. However, risks are on the rise that their earnings growth, profit margin, and cash flow may disappoint investors. Firms are investing heavily in artificial intelligence without proving their return on investment. They may write down their AI investments as a result.
Micron Technology (MU) expects demand for memory chips to slow this year. More chip producers may echo the same forecast. Despite those risks, strong broad-based market performance would lift stocks overall in 2025.
