North American equities performed exceptionally well in 2024, even doing better than what analysts expected. After rising 24.3% in 2023, the S&P 500 rallied an impressive 23% in 2024, marking its best two-year run in 25 years.
Those are big gains, especially in light of the fact that the S&P 500 has gained around 10.5% on an annual basis since its introduction in 1957. On top of that, the S&P 500 has only registered 20% or more in consecutive years just three times. It happened in 1935 and 1936, only to tumble 39% in 1937. After 20% gains in 1954 and 1955, the S&P 500 inched up 2.6% in 1956.
How Will the S&P 500 and TSX Do in 2025?
What does Wall Street think will happen in 2025? More of the same, but a bit less bullish. Goldman Sachs expects the S&P 500 to reach 6,500 by the end of 2025; that would represent a gain of 8.0% from current levels. The most bullish call comes from Deutsche Bank, with a 2025 S&P 500 target price of 7,000; up 16.3% from current levels.
Those calls could change throughout the year, of course. Should President-elect Donald Trump move as quickly as he has said he would with regards to America’s corporate tax rate, equities could rally on the hopes of bigger corporate earnings. On the other hand, should the U.S. economy not respond as expected and concerns of a recession return, the outlook for stocks could turn sour.
What about the S&P 500? The TSX also had a great year, hitting numerous record highs and ending the year up 18%. Canadian stocks are expected to hit fresh highs in 2025 despite political and economic uncertainty.
On the plus side, the Canadian economy is growing, albeit slowly. This, coupled with lower interest rates, should help corporate profits rise. There are some risks, which include Trump’s proposed 25% tariffs against Canadian goods.
More broadly, the TSX is expected to be supported by strong commodity prices and a weaker Canadian dollar (which could attract more outside investment in Canada and could further boost corporate profits).
Canada’s financial sector also performed well and is expected to enjoy tailwinds from upcoming mortgage renewals. Thanks to the growth in Artificial Intelligence (AI), some Canadian technology stocks are poised for solid growth too.
What does that look like on a practical level? Analysts at BMO have a bullish call for the TSX to end 2025 at 28,500. That represents an increase of 13.3% from current levels.
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