What To Expect From the US Stock Market in 2025

Stocks just had a banner year, and Wall Street’s optimistic that U.S equities will continue to rise in 2025.

The S&P 500 gained 23% in 2024 after rising 24% the previous year, its first two-year stretch of +20% returns since the late 1990s. The gains aren’t expected to be as robust in 2025, but market watchers say the outlook is generally positive.

Here is some of what analysts say you can expect from the stock market in the year ahead. 

Profit Growth to Broaden and Drive Stock Returns

Corporate earnings are expected to be the main driver of stock returns in 2025. 

Earnings growth has been narrow over the last two years. Surging spending on artificial intelligence and a raft of cost cuts have helped mega-cap tech profits to soar. Meanwhile, the S&P 493—or the S&P 500 without the Magnificent Seven—saw profits shrink in 2024, though JPMorgan analysts expect the group to record double-digit earnings growth in 2025.

The Magnificent Seven’s aggregate profit growth is still expected to outpace the rest of the index, albeit by the slimmest margin in seven years, according to Goldman Sachs forecasts.

That’s one reason why equities analysts at Bank of America expect the equal-weighted S&P 500 to outperform its capitalization-weighted counterpart.

The AI Trade May Enter a New Phase

Artificial intelligence has been the buzziest of buzzwords on Wall Street for more than two years now, and analysts see that continuing. 

“We see the AI buildout and adoption creating opportunities across sectors,” wrote BlackRock analysts in their 2025 outlook. 

Goldman analysts have similar expectations. They say the AI craze has passed through two “phases”: “Phase 1” was focused solely on Nvidia (NVDA), whose advanced chips made it the key enabler of the AI boom; “Phase 2” was slightly more expansive and included companies that were essential for the buildout of AI infrastructure.

Goldman analysts predict 2025 will bring “Phase 3,” in which investors will turn their attention to companies monetizing AI. They expect software and services companies to be the primary beneficiaries of the next phase of AI’s evolution, and named companies ranging from tech giants Apple (AAPL) and Salesforce (CRM) to small-caps such as Yext (YEXT) and Box (BOX) as strategic stock picks.

Small & Mid-Caps Could Outperform

Some analysts expect a small-cap and mid-cap renaissance, though they note it could easily be derailed or delayed.

Smaller companies are more reliant on floating-rate debt, meaning they benefit most when interest rates decline, and the Federal Reserve is expected to continue lowering rates. They’re also less likely than large companies to operate internationally, which could insulate them from geopolitical tensions and potential strains on global supply chains. 

Small- and mid-caps could also benefit from an easier regulatory environment under incoming President Trump, whose administration is expected to challenge corporate mergers and acquisitions (M&A) less aggressively than Biden’s. 

However, Trump’s policies could also derail or delay the small- and mid-cap rally. Economists warn that Trump’s tariff and immigration policies could stoke inflation and keep interest rates elevated, a problem for both M&A and smaller firms’ balance sheets.

2025 Could Be a Bumpy Ride for Stocks

Donald Trump will return to the White House in January with what he’s called a “historic mandate” to break from the status quo. He’s promised dramatic changes to trade policy, taxes, regulation, immigration, and government spending.

Analysts have struggled to predict how those changes will affect the economy, in part because of “the fluidity of Trump’s policy positions, his unconventional governing style, and the absence of detailed, consistent frameworks guiding his statements,” Charles Schwab analysts wrote in their 2025 outlook.

What is certain is that the year will contain plenty of twists and turns. Optimism about the economy and Trump’s accommodative government have pushed stocks to record highs. They’re also trading with historically high valuations, which Goldman analysts note, “typically increase[s] the magnitude of market drawdown during a shock.”