Updating our YE 2025 S&P 500 price target
With the first half behind us and a fresh forecast update from our partners in RBC Economics, Rates Strategy, and FX in hand, we’ve done some housekeeping on the different models we use to derive our target, and have made an important change to our overall framework.
The punchline is that we’ve raised our target significantly to 6,250. With this change, our price target essentially goes back to where it was in mid-March. The message we’re sending is that we feel neutral on the market in the back half of the year, and expect choppy conditions and swings in both directions.
There’s been no change to our 2025 S&P 500 EPS forecast of $258
We’ve refreshed our S&P 500 EPS model for the latest house views on GDP, inflation and rates. Generally, our teams see GDP in the mid 1% range, inflation just under 3% at the end of the year, 10 year yields a bit over 4%, and Fed cuts starting in December.
The punchline is that we are sticking with our $258 forecast for 2025, which is a bit below the bottom-up consensus of $265.
Macro wise, the interest rate backdrop is less favorable than our last update in the back half of 2025. We have also baked in a slightly more favorable margin backdrop for stocks in the 2nd half, removing our assumption for some very modest contraction, and the two essentially offset one another.
