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On Dec. 31 at one minute before midnight, the Waterford Crystal Times Square New Year’s Eve Ball will begin its slow descent to mark 2025.
When the 11,875-pound (5,386 kg) ball touches down, we will bid adieu to the old year, while the champagne flows, fireworks explode and people the world over make their resolutions.
Related: Fed interest rate cut bets in 2025 tied to Trump policy wild cards
The S&P 500 will begin the new year on a high note.
The index, which tracks the stock performance of 500 of the largest companies listed on U.S. stock exchanges, has climbed 26.7% so far this year, compared with 2023’s 24.2% rally.
The S&P 500 has hit over 50 record highs in 2024, with the first one happening on Jan. 19.
In November Donald Trump was elected president for the second time, and investors are increasingly focused on what’s to come from the second Trump administration’s policies and their potential market impact, U.S. Bank Asset Management said.
During the campaign, Trump promoted several key initiatives, including extending tax cuts that were part of 2017’s Tax Cut and Jobs Act, stricter immigration policies and potential new tariffs on imported goods.
Analysts cite risks for the S&P 500 in 2025
Markets will closely monitor the subsequent impact on economic growth and inflation, the investment advisory group said.
“We are still waiting for clarity on whether the new administration’s and Congress’s policies prove to be inflationary,” Eric Freedman, chief investment officer with U.S. Bank Asset Management, said.
Related: Inflation report adds to interest rate cut bet complexity
“Because we don’t yet have full details, our preference is to be mindful of short-term opportunities provided by market dislocations, but we don’t want to draw conclusions without sufficient evidence," added.
The S&P 500 is forecast to post its third straight year of gains amid solid economic expansion and steady earnings growth, according to Goldman Sachs Research.
David Kostin, chief U.S. equity strategist at Goldman Sachs, wrote last month that the index was projected to rise to 6,500 by the end of 2025, a 9% gain from its current level and a 10% total return including dividends.
The investment firm said that valuations were high by historical standards and might pose a risk for investors. The price-to-earnings multiple of the S&P 500 index has increased 25% during the past two years.
“An equity market that is already pricing an optimistic macro backdrop and carrying high valuations creates risks heading into 2025,” Kostin said.
High multiples are weak signals for near-term returns and typically increase the magnitude of market downturns when there’s a negative shock.