(Reuters) – Brokerage HSBC said on Friday it expects the index to reach 6,700 by the end of 2025, driven by strong corporate profit growth and a resilient U.S. economy.
The brokerage's current forecast implies an upside of around 10.3% from the index's last close of 6,075.11.
“We expect next year's stock returns to be focused on earnings growth as valuations are tighter,” HSBC analysts led by Nicole Inui wrote in a note. “Overall, we expect earnings growth of 9%, incorporating a slower but still resilient U.S. economy and some margin expansion.”
The benchmark index has performed well this year, having gained nearly 28% so far, largely boosted by so-called “Magnificent 7” stocks linked to the artificial intelligence boom.
A resilient macroeconomic backdrop, continued earnings growth and a gradual slowdown in inflation also supported the index.
The order and timing of the US Federal Reserve's monetary policy changes, inflation levels and high valuations will be key topics for the equity market through 2025, HSBC said.
The brokerage expects the Fed to make an additional 125 basis points (bps) cut by the end of 2025, including a 25 bps cut this month.
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