Stocks are in a bubble that will keep inflating until 2025 and push the market 30% higher, research firm says (2024)

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Stocks are in a bubble that will keep inflating until 2025 and push the market 30% higher, research firm says? ›

Stocks are in a bubble that will keep inflating until 2025 and push the market 30% higher, research firm says. The stock market is in a bubble, but that doesn't mean investors should sell their stocks right now. The S&P 500 still has 30% upside between now and the end of 2025, according to Capital Economics.

Analysts expect S&P 500 profits to jump 8% in 2024 and 14% in 2025 after subdued growth last year, data compiled by BI show.

Stock market bubbles: These occur when stock prices rise to unsustainable levels, often driven by speculation and excitement about a particular industry or company.

Here's its new S&P 500 target. The rally in May has also forced one of Wall Street's most prominent bears to turn bullish and bump up his prediction of where equities will go next. Mike Wilson, Morgan Stanley's chief U.S. equity strategist, said he sees the S&P 500 climbing to 5,400 by the second quarter of 2025.

A range of things can happen when an asset bubble finally bursts, as it always does, eventually. Sometimes, the effect can be small, causing losses to only a few, and/or short-lived. At other times, it can trigger a stock market crash, a general economic recession, or even depression.

The updated Dow Jones price prediction for the next 5 years is for the index to trade around 45,000 points. Long Forecast predicts Dow Jones to trade above 40,000 points in the second half of 2024 and and advance up to 44,000 points by the end of the year. This is the most bullish Dow Jones forecast for 2024.

While there could be a growth slowdown in the first half of 2024, experts believe growth should resume in the second half of the year. Americans faced many financial challenges this year, from persistent inflation to increasingly expensive debt.

Asset bubbles are especially devastating for individuals and businesses who invest too late, meaning shortly before the bubble bursts. In this regard, asset price bubbles bear a similarity to Ponzi or pyramid scams.

It's "impossible" to predict when the bubble will finally burst, how deep stocks will fall, or what will trigger the correction, Higgins noted. But one could come as soon as the end of next year, he suggested, as that would lengthen the pandemic bull market to about 5 years, the lifespan of the dot-com bubble.

The market sees a greater than 80% chance of at least five rate cuts from current levels by the end of 2024. Investor optimism about the economic outlook has improved dramatically from a year ago, but there's still a risk that Fed policy tightening could tip the economy into a recession in 2024.

What will the S&P be at the end of 2024? ›

By year-end, the benchmark index (.SPX) , opens new tab will be at 5,302, according to the median forecast of 50 strategists polled May 13-22.

The Big Money bulls forecast that the Dow Jones Industrial Average will end 2024 at about 41,231, 9% higher than current levels. Market optimists had a mean forecast of 5461 for the S&P 500 and 17,143 for the Nasdaq Composite —up 9% and 10%, respectively, from where the indexes were trading on May 1.

History textbooks tell us that the 1929 stock market crash signaled the beginning of the “Great Depression.” Warning signs of overvaluation and buying on the margin were flashing red lights that a corrective path needed to be taken to avoid Black Monday.

The term stock market crash refers to a sudden and substantial drop in stock prices. Stock market crashes are often the result of several economic factors, including speculation, panic selling, or economic bubbles. They may occur amid the fallout of an economic crisis or major catastrophic event.

Sentiment in the market is now neutral to slightly positive—not in bubble territory. IPO activity, which is a useful data point for equity market sentiment conditions, had been running at extreme highs leading into 2022, as a boom in SPACs and strong equity market conditions drove rapid share issuance.

The Big Money bulls forecast that the Dow Jones Industrial Average will end 2024 at about 41,231, 9% higher than current levels. Market optimists had a mean forecast of 5461 for the S&P 500 and 17,143 for the Nasdaq Composite —up 9% and 10%, respectively, from where the indexes were trading on May 1.

Traders work on the floor of the New York Stock Exchange on May 16, 2024. Wall Street is buoyed by hopes the Federal Reserve will pull back on its restrictive monetary policy after data showed inflation is beginning to ease.

To some investors, this might seem unlikely. The Dow Jones Industrial Average, an index that has astonished with its ascent over the past decade, likely will continue to astonish through the 2020s, rising to 50,000 by 2027.

Yardeni said in a recent note that his roaring 20s thesis, which is based on the idea that AI will help unleash a productivity boom in the economy, will help drive the stock market 50% higher by 2030, with the Dow Jones Industrial Average and S&P 500 rising to 60,000 and 8,000, respectively.