US Stock Market Forecast 2025: What Wall Street Expects Into Year‑End After the Fed Pivot

Published: November 30, 2025 – Not investment advice.

Key takeaways

US stocks head into December near record highs, with the S&P 500 up roughly mid‑teens percent for 2025 and entering its historically strong year‑end period. ^[1]
The Federal Reserve has already cut rates twice in 2025, and economists widely expect another 25 bps cut in December as growth cools and inflation edges lower. ^[2]
Wall Street’s S&P 500 targets for year‑end 2025 cluster between 6,000 and 7,100, with most major banks still expecting further gains – but from increasingly stretched valuations. ^[3]
AI remains the dominant market theme, powering both earnings optimism and fears of an eventual bubble as mega‑cap tech drives a large share of index returns. ^[4]
Long‑term forecasts are much more sober: Goldman Sachs, among others, sees US stocks returning about 6.5% annually over the next decade, potentially lagging other regions. ^[5]

1. Where the US market stands on 30 November 2025

US equities reach the final month of 2025 in a position that would have sounded ambitious back in 2022:

The S&P 500 is up around 16% year‑to‑date, trading close to all‑time highs after rebounding from a sharp pullback earlier in the year. ^[6]
The Nasdaq Composite and Dow Jones have also hit multiple record closing highs in 2025, powered by AI‑heavy tech names and resilient consumer‑facing sectors. ^[7]

Market focus right now is split between two big forces:

The AI “supercycle” – massive capital spending by companies like Nvidia, Microsoft and Alphabet, which has dominated earnings growth and index performance. ^[8]
The Federal Reserve’s pivot from holding to easing, as growth cools and inflation drifts closer to target.

After cutting rates in October to a 3.75–4.00% federal‑funds range, the Fed is widely expected to trim again by 25 bps at its December meeting, which would take the range down to 3.50–3.75%. ^[9]

That combination – lower rates, moderating inflation and strong tech earnings – is the backdrop for forecasts into year‑end.

2. Macro backdrop: Slower growth, but not a collapse

Most institutional outlooks describe a cooling but still‑growing US economy as 2025 winds down:

GDP growth: S&P Global Ratings expects US growth to slow to about 2% in both 2025 and 2026, down from roughly 2.8% in 2024, describing a “narrow path” between soft landing and recession. ^[10]
Inflation: Delayed data from the autumn government shutdown aside, economists estimate core PCE inflation around 2.9% year‑on‑year, showing progress but still above the Fed’s 2% goal. ^[11]
The Cleveland Fed’s nowcasting models show inflation running in the low‑to‑mid single digits, consistent with gradual disinflation rather than a rapid collapse in prices. ^[12]
The New York Fed’s Survey of Consumer Expectations finds 1‑year‑ahead inflation expectations at 3.2%, with 3‑ and 5‑year expectations at 3.0%, suggesting inflation psychology is easing but not fully “anchored” back at 2%. ^[13]

The Fed’s October policy statement underscores this uncertainty, noting elevated risks to both inflation and employment even as it begins cutting rates. ^[14]

Translation for markets: the base case is slower but positive growth and gradual easing, not an imminent deep recession or runaway inflation. That supports equities – but also leaves them sensitive to any data that pushes the Fed to cut faster (bad growth news) or slow down (sticky inflation).

3. Are US stocks overvalued heading into year‑end?

Valuation is one of the most contested issues in current forecasts.

Morningstar’s latest November 2025 US stock market outlook estimates the broad US equity market is trading at roughly a 2% discount to its composite fair value across more than 700 covered stocks – nearly “fairly valued” in aggregate. ^[15]
However, they and others point out significant dispersion: mega‑cap AI leaders often look richly valued on traditional metrics, while parts of value, small‑caps and certain cyclicals still trade at discounts.

Charles Schwab’s market perspective notes that investors are watching the anticipated December Fed rate cut closely, as lower yields tend to support more cyclicals and smaller companies that have lagged the AI‑heavy leaders. ^[16]

Put simply: the index as a whole isn’t obviously in bubble territory, but leadership is narrow and expensive. That mix explains why 2025 year‑end targets cluster around modest upside from current levels rather than calling for another explosive melt‑up.

4. S&P 500 year‑end 2025 targets: The Wall Street range

Here is a simplified snapshot of published S&P 500 year‑end 2025 targets from major firms (all figures refer to the index level):

Institution	Latest public 2025 target	Tone into year‑end 2025
UBS	6,000 ^[17]	Moderately constructive but cautious on the pace of Fed easing.
RBC Capital Markets	6,250 ^[18]	Slightly below consensus on earnings; sees upside but warns on tariffs and margins.
Goldman Sachs	6,800 (raised from 6,600) ^[19]	Bullish on earnings and benefits of a dovish Fed.
BMO Capital Markets	7,000 (raised from 6,700) ^[20]	Cites strong earnings and Fed cuts as key drivers.
Oppenheimer	7,100 ^[21]	Very bullish, viewing pullbacks as buying opportunities in an ongoing bull market.

For context, the S&P 500 is currently trading in the high‑6,000s, implying that:

The more conservative houses (UBS, RBC) see limited upside or even mild downside from current levels into New Year’s Eve. ^[22]
Goldman Sachs and BMO still pencil in moderate gains, consistent with a classic “Santa rally” scenario. ^[23]
Oppenheimer’s 7,100 call sits at the bullish end of the 2025 range, assuming the AI‑led bull market remains intact through December. ^[24]

A lot of the near‑term debate boils down to seasonality vs. fatigue:

History shows strong rebounds like November’s often lead to positive December returns. ^[25]
But we’re also in what some strategists describe as the “late‑cycle stage” of the current bull market, with high valuations and very crowded trades. ^[26]

5. Looking past December: 2026 targets and the AI “supercycle”

Even though this article focuses on forecasts through year‑end 2025, it’s impossible to ignore how 2026 targets shape today’s sentiment.

Several major banks have recently released very bullish 2026 S&P 500 targets:

J.P. Morgan: base case 7,500 by end‑2026, about 11% above recent levels, driven by a “robust AI‑driven supercycle” and double‑digit annual earnings growth. ^[27]
Deutsche Bank: 8,000 by end‑2026, implying roughly 21% upside from late‑November levels – one of the most bullish calls on the Street. ^[28]
UBS Global Research: 7,500 year‑end 2026 target, again citing strong AI‑related capital expenditure, resilient tech earnings and supportive policy. ^[29]
Morgan Stanley: recently lifted its 12‑month S&P 500 target to 7,800, arguing that recent volatility could actually make it easier for the Fed to keep cutting and sustain the bull market. ^[30]

The common thread is AI:

Firms expect AI‑related capex booms, higher productivity and stronger earnings growth across big tech, semiconductors, cloud and even sectors like financials and healthcare. ^[31]
These forecasts implicitly support year‑end 2025 optimism, because strategists see any correction into December as likely to be a pause in a multi‑year uptrend, not the end of the cycle.

However, not all long‑term views are euphoric:

Goldman Sachs expects the S&P 500 to deliver about 6.5% annual total returns over the next decade, below its historical average and behind the bank’s forecasts for some international markets. ^[32]

That divergence – bullish 1–2 year targets but modest 10‑year expectations – is exactly what you would expect late in a long bull market.

6. Risks that could derail a year‑end 2025 rally

Even the most optimistic forecasts come with a long list of caveats. Key risks that analysts highlight include:

6.1. Valuation and AI concentration

With mega‑cap AI stocks contributing an outsized share of index gains, strategists worry about:

High concentration risk: A handful of tech names now drive a large portion of S&P 500 earnings and market cap. ^[33]
Timing of AI payoffs: Investors are increasingly asking when huge AI investments will translate into durable profits, not just revenue growth. ^[34]

Any disappointment in AI earnings – or regulatory action against dominant platforms – could hit the index hard, even if the broader economy holds up.

6.2. Slower growth and Fed missteps

While the base case is a soft landing, a few things could go wrong:

Growth could slow faster than expected, pushing unemployment high enough to trigger the Sahm Rule recession indicator, which watches for a 0.5‑percentage‑point rise in unemployment’s 3‑month average vs its recent low. ^[35]
Conversely, if inflation proves “sticky” and core measures don’t move closer to 2%, the Fed might have to pause or slow rate cuts, undermining part of the bull case. ^[36]

Either scenario would force markets to revisit the rosy earnings and valuation assumptions embedded in many 2025 targets.

6.3. Fiscal deficits and global positioning

Another theme gaining traction is US fiscal risk:

Goldman Sachs has warned that, despite near‑term market strength, the US could underperform other regions over the next decade as investors start to focus more on high deficits and debt dynamics. ^[37]

If bond investors demand higher risk premiums for US debt, higher long‑term yields could eventually weigh on equity valuations too.

6.4. Geopolitical and regulatory shocks

Most 2025 forecasts also flag:

Ongoing trade tensions and tariff uncertainty, particularly after earlier episodes already forced strategists like RBC to trim earnings expectations. ^[38]
Potential new regulations affecting big tech, data usage and AI models, which could alter profit trajectories for key index constituents.

7. Seasonality, sentiment and the “Santa Rally” question

With just one month left in 2025, seasonality matters:

Historical studies show that when the S&P 500 posts a sharp upside “reversal” in November, December is statistically more likely to be positive – the classic “Santa rally”. ^[39]
This year, that seasonal pattern aligns with strong performance in October and November, bolstered by AI earnings beats, easing inflation and prior Fed cuts. ^[40]

Bank of America’s November outlook even described a “perfect mix” of seasonal strength in the S&P 500, tech and small caps – though the bank has recently leaned more cautious on 2026 return potential, warning that strong earnings may not automatically translate into another year of outsized gains. ^[41]

There is, however, clear late‑cycle behavior:

Morgan Stanley and other managers describe this as the fourth year of the current bull market, noting signs of investor exuberance in crowded trades and aggressive positioning. ^[42]

That mix of constructive data, strong seasonality and stretched sentiment is why year‑end scenarios usually fall into three camps:

Base case – mild Santa rally
- S&P 500 finishes 2025 somewhere near the mid‑point of the Street’s 6,000–7,100 target range.
- AI remains strong; Fed cuts once more; economic data stays “just good enough.”
Bull case – extended melt‑up
- Data surprises to the upside, Fed signals more cuts in 2026, and the AI‑led capex boom accelerates.
- Index approaches the high end of bullish 2025 targets (near 7,100) and the more aggressive 2026 path becomes the new consensus. ^[43]
Bear case – year‑end air pocket
- A negative surprise in jobs or inflation pushes the Fed off course, or an AI leader delivers underwhelming guidance.
- Multiple compression takes the S&P 500 back toward the lower end of forecasts or below, even if the long‑term AI story stays intact.

8. What this means for investors (and what it doesn’t mean)

Because this article is for information and not advice, it’s worth stressing what forecasts can and can’t do.

What they can do:

Highlight how consensus expectations have shifted:
- From “higher for longer” rates to active easing;
- From recession fears to soft‑landing optimism;
- From broad‑based value to AI‑centric growth leadership. ^[44]
Show the range of plausible outcomes into year‑end – roughly flat to moderately higher index levels, with relatively few big houses forecasting a crash in the next month.
Flag the macro and policy events to watch in December:
- The next Fed meeting;
- Updated inflation data (CPI, PCE);
- Labor market reports;
- Earnings and guidance from major AI and consumer names. ^[45]

What they can’t do:

Guarantee how the market will behave over a few weeks – short‑term moves are still dominated by headlines and positioning.
Predict which sectors or individual stocks will outperform; even when the index view is right, leadership often shifts unexpectedly.
Replace a thoughtful plan tailored to your time horizon, risk tolerance and liquidity needs.

For anyone using these forecasts:

Treat them as scenarios, not promises.
Focus more on whether a given outlook assumes higher or lower volatility, broader or narrower market leadership, and faster or slower earnings growth than you personally believe.
Consider diversifying across regions and styles, especially as some long‑term forecasts suggest non‑US markets may do better from here. ^[46]

And always remember the fine print that many of the very sources cited here emphasize themselves: past performance is not a guarantee of future results, and you can lose money investing in stocks, including in the short run.

This article is for informational and journalistic purposes only and does not constitute investment, legal or tax advice. Consider consulting a qualified financial professional before making investment decisions.