HSBC Forecasts S&P 500 to Reach 6,700 by End of 2025

(Reuters) – Brokerage HSBC said on Friday it expects the S&P 500 index to hit 6,700 by the end of 2025, driven by robust corporate earnings growth and a resilient U.S. economy.

The current forecast implies an upside of about 10.3% from the index's last close of 6,075.11.

> "We expect next year's equity returns to be focused on earnings growth as valuations are more stretched," wrote HSBC analysts led by Nicole Inui in a note. "Overall, we expect earnings to grow by 9%, incorporating a slower but still resilient U.S. economy and some margin expansion."

The benchmark index has performed well this year, gaining close to 28%, broadly boosted by the so-called 'Magnificent 7' stocks during the artificial intelligence boom.

A resilient macro-economic backdrop, continued earnings growth, and gradual easing in inflation have also supported the index.

HSBC noted that the sequence and timing of the U.S. Federal Reserve's monetary policy changes, inflation levels, and elevated valuations will be key topics for the equity market leading into 2025.

The brokerage projected the Fed to cut rates by a further 125 basis points (bps) by the end of 2025, including a 25 bps cut this month.