Recently, Goldman Sachs predicted that the S&P 500 index will climb to 6,500 by late 2025, driven by sustained U.S. economic growth and robust corporate earnings, according to Yahoo Finance. This marks an increase of about 9.25% from the current level, with the index already up 26% year to date (as of Nov. 21).
The investment firm projects an 11% rise in corporate earnings and 2.5% real GDP growth for the United States in 2025. However, they have maintained that risks persist for the economy due to uncertainty surrounding President Trump’s economic proposals.
According to Goldman Sachs, as quoted on Yahoo Finance, the impact of Trump’s tariffs and a potential 15% corporate tax rate for domestic manufacturers will roughly balance each other out, with the 'Magnificent 7' tech stocks projected to continue outperforming the rest of the S&P 500 next year.
Earlier, Morgan Stanley CIO and chief U.S. equity strategist, Mike Wilson, who has largely been bearish in recent years, turned bullish, raising his S&P 500 year-end target for 2025 to 6,500, as quoted on Yahoo Finance. Wilson had credited Fed's interest rate cuts, improving economic growth and the potential for a wave of deregulation under the Trump administration, suggesting that investors should adopt a bullish outlook on stocks.
Robust Retail Sales and Consumer Spending Spark Optimism
According to Reuters, U.S. retail sales in October rose slightly above expectations, driven by increased household spending on motor vehicles and electronics, signaling a strong start to the fourth quarter for the economy.
Goldman Sachs forecast that the Fed will continue cutting interest rates, taking them down to 3.25-3.5%. Per David Mericle, chief U.S. economist at Goldman Sachs Research, consumer spending is expected to remain the key driver of robust growth, fueled by increasing real income from a strong labor market and enhanced by wealth effects.
ETFs to Explore
Below, we highlight funds for investors to capitalize on strong optimism, alongside a forecast accelerated and sustained bull run.
S&P 500 ETFs
Optimistic forecasts for the broad market index, hinting at a continuing bull run, makes investing in funds tracking the index an appealing investment strategy.
SPDR S&P 500 ETF Trust (SPY)
SPDR S&P 500 ETF Trust charges an annual fee of 0.09% and has gained 37.82% over the past year. The fund has added 3.63% over the past three months.
Vanguard S&P 500 ETF (VOO)
Vanguard S&P 500 ETF charges an annual fee of 0.03% and has gained 37.98% over the past year. The fund has added 3.66% over the past three months.
iShares Core S&P 500 ETF (IVV)
iShares Core S&P 500 ETF charges an annual fee of 0.03% and has gained 37.97% over the past year. The fund has added 3.66% over the past three months.
Nasdaq and Magnificent Seven ETFs
The Fed's rate cut, combined with a tech rally driving the bull market, makes Nasdaq-focused ETFs appealing. Given that the tech sector relies heavily on borrowing to accelerate growth, lower interest rates create a cost-effective environment for obtaining additional funds to support further initiatives.
Additionally, according to Goldman Sachs, the "Magnificent Seven" stocks are expected to outshine the other 493 stocks in the S&P 500, though their outperformance is projected to be the narrowest since 2018.
Investors can consider funds likeInvesco QQQ QQQ, Invesco NASDAQ 100 ETF QQQM, Roundhill Magnificent Seven ETF MAGS and Vanguard Mega Cap Growth ETF MGK.
Small-Cap ETFs
As small-cap companies are more domestically tied, they are poised to outperform when the economy improves. Additionally, proposed corporate tax rate cut and deregulation would boost profits for smaller companies.
iShares Core S&P Small-Cap ETF (IJR)
iShares Core S&P Small-Cap ETF charges an annual fee of 0.06% and has gained 29.90% over the past year. The fund has lost 3.25% over the past three months.
iShares Russell 2000 ETF (IWM)
iShares Russell 2000 ETF charges an annual fee of 0.19% and has gained 33.88% over the past year. The fund has lost 2.27% over the past three months.
Vanguard Small-Cap ETF (VB)
Vanguard Small-Cap ETF charges an annual fee of 0.05% and has gained 34.33% over the past year. The fund has added 1.37% over the past three months.
Growth ETFs
Investors can also explore growth ETFs without the constraint of a low beta. Growth funds typically excel during market uptrends, providing exposure to stocks with high growth potential. Growth investing prioritizes capital appreciation over annual income or dividends.
Vanguard Growth ETF (VUG)
Vanguard Growth ETF charges an annual fee of 0.04% and has gained 44.03% over the past year. The fund has added 4.44% over the past three months.
iShares Russell 1000 Growth ETF (IWF)
iShares Russell 1000 Growth ETF charges an annual fee of 0.19% and has gained 43.58% over the past year. The fund has added 4.58% over the past three months.
iShares S&P 500 Growth ETF (IVW)
iShares S&P 500 Growth ETF charges an annual fee of 0.18% and has gained 43.40% over the past year. The fund has added 4.38% over the past three months.
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Get it free >>Invesco QQQ (QQQ): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Russell 2000 ETF (IWM): ETF Research Reports
Vanguard S&P 500 ETF (VOO): ETF Research Reports
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
Vanguard Small-Cap ETF (VB): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports
iShares S&P 500 Growth ETF (IVW): ETF Research Reports
Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports
Invesco NASDAQ 100 ETF (QQQM): ETF Research Reports
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