Barclays predicts major S&P 500 rally in 2025

The U.S. economic landscape appears optimistic as Barclays has raised its price target on the S&P 500 to 6,600, indicating a projected 10% increase for 2025. This revision, made by equity strategist Venu Krishna, is influenced by expectations of exceptional performance from U.S. technology stocks and a positive feedback loop between consumer income and spending. Despite expected deceleration in market growth compared to the rapid pace seen in 2023 and 2024, the firm believes that overall macroeconomic conditions will remain supportive for U.S. equity markets. Consumer health is seen as stable, backed by low delinquency rates and solid savings, countering fears of widespread financial distress among households. Additionally, Barclays has adjusted its earnings expectations, increasing the forecast for earnings per share (EPS) for the S&P 500 to $271, which suggests nearly a 12% year-over-year growth. This improvement reflects a potential underestimation on Wall Street regarding Big Tech's earnings potential, as guidance from these companies shows signs of improvement while concerns are inflated regarding other sectors. Although this sector faces challenges such as disinflationary margin pressures and slower growth outside the U.S., Barclays remains bullish on Big Tech's ability to drive market performance. Further adjustments were made to sector ratings, with the healthcare sector receiving an upgrade due to positive earnings forecasts and potential electoral advantages. In contrast, the industrial sector was downgraded to a neutral rating, indicating a more cautious outlook. The overall sentiment from Barclays underscores a constructive market environment for U.S. equities, particularly in tech, as investor positioning appears to be favorable amidst policy uncertainties and evolving economic conditions.