Evercore strategists anticipate the S&P 500 index will surge to 6,600 by mid-2025, driven by several favorable factors following Donald Trump’s anticipated return to the White House.
The election outcome, which saw Donald Trump secure a decisive victory alongside a potential Republican majority in Washington, has significantly boosted investor sentiment.
According to Julian Emanuel and his team at Evercore, Trump’s win is fueling a "meltup/performance chase," powered by rising consumer confidence and a renewed wave of speculative trading across various assets, including Tesla, small-cap stocks, and cryptocurrencies.
While the S&P 500’s current price-to-earnings (P/E) ratio is elevated at 24.6x, Emanuel points out that "expensive has a history of getting more expensive and delivering longer-lasting gains."
Evercore believes that heightened market exuberance, characterized by extreme sentiment and valuations, will be a key driver of continued price growth.
As a result, the firm has introduced a price target of 6,600 for the S&P 500 by June 30, 2025. This forecast is based on an expected earnings per share (EPS) of $257 for 2025, with a projected P/E ratio of 25.7x.
For 2024, Evercore projects an EPS of $240, suggesting a slightly higher P/E ratio of 27.5x.
Historically, bull markets deliver an average gain of 152% over a span of 50 months. Emanuel argues that the current bull market, now 25 months in with a 65% increase, still has room to grow.
Small-cap stocks, benefiting from a "soft landing on solid ground," are likely to outperform as business uncertainty diminishes and conditions improve for smaller companies.
The Federal Reserve’s recent rate cuts are also central to Evercore's forecast, with expectations for additional cuts extending through 2025.
This outlook aligns with Evercore’s "Fed Rate Cut Playbook," which traditionally benefits sectors like tech, communication services, small caps, and defensive areas such as consumer staples and healthcare.
Emanuel recommends a barbell investment strategy, balancing growth sectors with defensive stocks, to help investors navigate potential interest rate-related risks, which remain a "wall of worry" for some market participants.
