Goldman's 2025 Stock Prediction: A Boost for Investors

Goldman Sachs has some good news for investors. They think the S&P 500, a key stock market index, will go up by 11% in 2025. That's a total return of 12% when you include dividends. Why? Because the economy is growing, and companies are making more profits. The firm's team, led by David Kostin, says the price-to-earnings ratio (P/E) will be 21. 5x by the end of next year, down slightly from the current 21. 7x. They also expect profit margins to get better, reaching 12. 3% in 2025 and 12. 6% in 2026. Goldman has set a new target of 6, 500 for the S&P 500, which was at 5, 893. 62 on Monday. The stock market has been doing great in 2024, jumping 24% due to cooling inflation and excitement about artificial intelligence. Goldman was too cautious with their 2024 forecast, first predicting a 5% increase to 4, 700, then raising it to 5, 100, and finally to 6, 000. They think President Trump's policies will balance out, with lower taxes canceling out the effects of possible tariffs. For 2025, Goldman suggests investing in big tech stocks like Amazon, Apple, and Microsoft. They also think merger activity will increase by 25%, with companies like Zoom Video and Electronic Arts being potential targets. Stocks that help small businesses and those tied to the growth of artificial intelligence are also good bets. However, they warn that the market might be a bit bumpy next year, with risks like broad tariffs and higher bond yields.