The stock market has soared in 2024, and the S&P 500 has turned in one of its best years ever, up around 25 percent. Expect more gains in 2025, say analysts in Bankrate’s Fourth-Quarter Market Mavens Survey. They foresee the market climbing 7 percent higher in the coming 12 months, a solid but more muted gain after sizzling hot performances from the S&P in both 2023 and 2024.
The survey’s respondents forecast the S&P 500 to rise from 6,051 at the end of the survey period to 6,472 by the end of 2025. It’s the 17th straight survey in which market experts have predicted a gain in the coming four quarters. The pros also preferred U.S. stocks over international equities, and still preferred growth stocks to their value-priced rivals in 2025.
Investors are climbing the proverbial wall of worry right now. Stocks look pricey after two strong years of gains, and the Trump administration is about to retake the helm. Reintroducing bold policies such as tariffs could cause significant disruption. Top it off with inflation, where the annual rate is lower but arguably not fully contained as yet, even as the Federal Reserve cuts interest rates.
“There’s a world of uncertainty facing investors, including the variables of fiscal and monetary policy here at home,” says Mark Hamrick, Bankrate’s senior economic analyst. “What will the president and GOP-led Congress do? How will the Federal Reserve respond? What will inflation and growth look like? It is prudent to assess both the risks and opportunities.”
Here are the highlights from Bankrate’s quarterly Market Mavens survey.
Forecasts and analysis:
This article is one in a series discussing the results of Bankrate’s Fourth-Quarter 2024 Market Mavens Survey:
Stocks expected to run 7 percent higher in year ahead, say pros
Even after a strong 2024, market watchers project the coming year will still show a solid return for the S&P 500 stock index, a collection of the market’s best stocks. The average estimate for year-end 2025 is 6,472, a gain of 7.0 percent from 6,051 at the end of the survey period on Dec. 13, 2024. That’s a notable uptick from the second-quarter and third-quarter Bankrate surveys, when analysts predicted just a 4 percent climb in the subsequent four quarters.
Experts not so optimistic about five-year returns
The last two years of strong gains may be leaving market watchers less optimistic about returns over the next five years. Here are their estimates for the market’s returns over the next five years, compared to the S&P 500’s average historical gains of about 10 percent per year.
- Forty percent said returns over the next five years will be lower than long-term returns.
- Thirty percent of respondents said returns will be about the same as their historical average.
- Thirty percent said returns will be above the historical average.
Those figures were broadly in line with the numbers from the third-quarter survey. Here are the results of the four previous surveys for comparison.
Few analysts thought the valuation of stocks looked attractive even if they thought the business climate as a whole looked favorable, leading to a variety of outlooks for stocks.
“The current starting point in terms of valuations is higher than normal, making outsized returns harder to come by,” says Chris Fasciano, senior portfolio manager, Commonwealth Financial Network, who expects lower-than-normal returns over the next half-decade.
Among those expecting average returns over the next five years is Patrick J. O’Hare, chief market analyst, Briefing.com. “Market returns have been running hot in the last few years as multiples have expanded. We are starting from a point of higher valuations that should curtail return prospects, but if interest rates remain well-behaved, we should be able to achieve total returns in line with the historical average,” he says.
Others pointed to favorable business and investment conditions for their optimism that stocks would exceed long-run averages.
“I believe the business-friendly policies from [the] government along with a better-than-expected productivity contribution from AI will generate strong returns,” says Michael K. Farr, president and CEO, Farr, Miller & Washington.
U.S. stocks still the pros’ top pick
U.S. stocks have had a fine run over the last couple years, and the survey’s respondents expect them to continue to outperform international stocks over the next year, and opinion was nearly unanimous.
- Ninety percent of respondents favor U.S. stocks over the coming year.
- Zero percent picked international stocks to outperform U.S. equities.
- Ten percent said the returns between the two would be about the same.
The preference for domestic stocks was up more than even in the third quarter, when 75 percent of respondents selected them to outperform. It’s been a strong showing for U.S. stocks in the survey all year long.
The reasons for optimism on U.S. stocks covered any number of different bases.
“We continue to believe that the best combination of valuations and fundamentals will be in the U.S.,” says Fasciano. “Geopolitical risks could also impact international stocks, keeping the multiples lower.”
“The U.S. still looks like the most vibrant market over the next year based on the earnings outlook, potential for lower taxes, other business-friendly policies and lower rates,” says Dec Mullarkey, managing director, SLC Management. “While some key overseas markets remain weak, the U.S. consumer continues to be resilient as the labor market remains strong.”
“Comparatively, the growth rate of the U.S. economy and earnings will exceed most other markets in response to accommodative monetary and fiscal policies and, in particular, tax policy,” says Hugh Johnson, chairman and chief economist, Hugh Johnson Economics.
Here’s what you can expect when it comes to taxes and tariffs as Trump begins a second term as president in January.
Growth stocks are back in favor over value stocks
After a poor showing in the third-quarter survey, growth stocks regained some of their favor with analysts in the most recent survey. The pros chose them to outperform value stocks in the coming year.
- Forty percent of respondents favor growth stocks to outperform value.
- Thirty percent of respondents prefer value stocks to growth stocks.
- Thirty percent think returns will be about the same.
Growth stocks rebounded to favor in the most recent survey, after falling drastically in the prior quarter.
Responses varied significantly, with analysts pointing to relative valuations, earnings growth and more as rationales for their position.
“Growth always wins,” says Kim Forrest, chief investment officer/founder, Bokeh Capital Partners. “Value is growth that hasn’t been working in a while.”
“Third years of bull markets are typically quite challenging. Investors will likely gravitate to the safety of value stocks,” says Sam Stovall, chief investment strategist, CFRA Research, who expressed similar sentiments in the third-quarter survey.
O’Hare detailed some of the assumptions built into the belief that value stocks will outperform.
“If rates come down, inflation doesn’t heat up again, earnings grow by double digits, regulations get relaxed, economic growth remains above potential, and a GOP-controlled Congress pushes to extend the tax cuts and lower the corporate tax rate (all of which the market believes will happen), then value stocks should outperform growth stocks over the next 12 months,” he says.
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Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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