Wall Street's high water mark for the S&P 500 (^GSPC) projects a nearly 17% increase from current levels at the end of 2025.

On Monday, Deutsche Bank chief global strategist Binky Chadha issued a year-end target of 7,000 for the S&P 500, matching Yardeni Research's call as the most bullish among strategists tracked by Yahoo Finance.

In explaining his thinking, Chadha highlighted the current strong macroeconomic backdrop where unemployment has remained low while economic growth has proved resilient.

"For equities, strong equity inflows are partly driven by strong cyclical growth as it impacts views on prospective corporate earnings and equity returns," Chadha wrote. "Inflows have also been driven by rising risk appetite which is currently very elevated. It certainly bears watching but risk appetite in our view should be high with the unemployment rate near 4% and GDP growth at 3%, a rare strong combination that has occurred just 6% of the time historically."

Chadha added that prior periods with similar economic backdrops include the 1960s and the back half of the 1990s which both saw "strong equity performance."

From a sector prospective, Chadha, like others on Wall Street issuing 2025 outlooks, is skeptical that the next leg higher in markets is led by megacap tech amid slowing earnings growth. Instead, he expects growth to "continue rotating slowly in 2025" and is leaning into areas he believes could benefit from continuing economic expansion.

"At the sector level, we maintain a cyclical tilt, remaining overweight the Financials where a multitude of tailwinds are converging, Consumer Cyclicals and Materials," Chadha wrote.

While much of the focus in 2024 was on signs of slowing in the economy, Chadha's team sees a cycle where various aspects of expansion, like capital expenditure spending outside of tech, corporate confidence increases as well as a merger and acquisition (M&A) pickup are "still to come."

"US capital markets and M&A activity has been running at low levels on persistent uncertainties around the business cycle, inflation, domestic politics and geopolitics," Chadha wrote. "An unfavourable regulatory regime has also clearly been a drag. A combination of greater corporate confidence and an easier regulatory regime could spark a rebound in M&A and capital markets activity."

Yardeni Research president Ed Yardeni, who also sees the S&P 500 hitting 7,000 by the end of the year, told Yahoo Finance recently that part of that will be driven by a more pro-business Trump administration and the return of "animal spirits."