JPMorgan has raised its 2025 outlook for the U.S. stock market, increasing its 12-month price target by 55% compared to its previous 2024 estimate. The bank now expects the S&P 500 to end 2025 at 6,500, reflecting a potential upside of about 8%, up from a prior target of 4,200 for the 2024 year-end.

JPMorgan strategist Dubravko Lakos-Bujas attributes this optimism to the strengthening business cycle, U.S. economic exceptionalism, and ongoing global central bank easing, alongside the Federal Reserve's expected tapering of quantitative tightening in the first quarter.

This shift in outlook marks a change from the bank's earlier bearish stance under Marko Kolanovic, who departed the firm in July. Kolanovic had maintained a bearish perspective even during the S&P 500’s 2023 26% rally. Lakos-Bujas sees strength in the consumer sector as a key driver for the positive market outlook, noting that U.S. households are benefiting from a strong labor market and substantial wealth, estimated at $165 trillion. Additionally, potential reductions in energy prices could further support consumer spending.

Lakos-Bujas also highlighted the potential market impact of Donald Trump's recent election win, pointing out that a business-friendly environment and deregulation could unlock significant productivity and capital gains. Moreover, JPMorgan expects AI investments to significantly contribute to future economic growth, estimating that AI spending could exceed $1 trillion, rivaling the size of the U.S. defense budget within five years.

Looking ahead, JPMorgan forecasts S&P 500 earnings per share of $270 in 2025, signaling a 10% growth year-over-year, driven by a 2% real GDP growth and anticipated interest rate cuts from the Fed. This broadening earnings growth is expected to keep the positive market momentum intact.

JPMorgan's upbeat outlook follows a similar shift from Morgan Stanley's Mike Wilson, who also became more positive on the market after being bearish for much of its two-year bull run.

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