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Key Takeaways

• Wall Street analysts generally expect stocks to post another year of gains in 2025 as a strong economy and declining interest rates boost corporate earnings.

• The gap between the Magnificent Seven and the rest of the market is expected to narrow as more companies begin to reap the benefits of artificial intelligence.

• Small-cap and mid-cap stocks could perform well in the year ahead thanks to lower interest rates, as well as an easier regulatory environment under incoming President Donald Trump.

• Some analysts warn, however, that market volatility could increase after Trump returns to the White House given uncertainty about how his policy approach could affect the economy.

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.