Asset Management
12/08/2025 Market Strategy
December 08, 2025
Key Takeaways
We are initiating a year -end target price of $8100 with an earnings projection of $305 for the S&P 500 in 2026. We project earnings growth of 12% with a forward P/E multiple of 26.5x that likely should move lower from what appears a lofty multiple should earnings beat expectations as they have with some regularity since 2023.
Our positive outlook for the S&P 500 is based on a number of factors that include persistent resilience evidenced in US economic data, S&P 500 corporate results throughout most of this year beating expectations…
Our positive outlook for the S&P 500 is based on a number of factors that include persistent resilience evidenced in US economic data, S&P 500 corporate results throughout most of this year beating expectations. This, in our view, augurs for further improvement in corporate results in 2026.
Thus far notwithstanding eleven hikes, fourteen pauses and five rate cuts since March 2022 the Fed has successfully brought down the pace of inflation from 9.7% to between 2.8% and 3.0% (based on last week’s release of the PCE price data for September) without pushing the US economy into recession.
Last week saw the release of data tied to inflation and initial jobless claims that in our view appeared supportive of prospects for the Fed to cut its benchmark rate at its FOMC meeting on Wednesday of this week. We also expect the central bank to make at least one or two additional trims to its benchmark next year if inflation remains contained.
We also believe that the long -standing structure of the Federal Reserve will support and maintain its independence through the leadership transition expected in May next year.
Despite what we and some others consider a fairly remarkable achievement by the Federal Reserve considering how high inflation was and how much tamer it is now, folks looking to get a mortgage, consumer loan seekers, highly leveraged investors and others including the Administration feel the Fed should lower rates at a much quicker pace and worry that current monetary policy could slow the economy further if the Fed remains cautious.
We expect the Fed will cut its benchmark rate by a quarter percent in December as a continuation of what we call a “down payment” process to signal to Wall Street and Main Street that indeed the Fed has the end of its tight monetary policy in its sights.
Should the Fed cut rates a quarter percent in December the market is likely to reflect the rate cut positively if not enthusiastically. In 2026 we expect the Fed will likely cut rates further if the flow of economic data suggests that inflation is slowing or if the unemployment rate rises further.
Ironically, the high consumer goods prices most people complain about reflect the stickiness of inflation that has yet to be worked out of the system. Cutting rates too quickly could stoke the burning embers that remain of inflation that peaked at 9.7% in 2022.
With just five firms among the S&P 500 left to report Q3 results, once again results have proven stronger than expected in the current earnings season with YoY earnings growth of 12.9% from a year earlier on back of 8.3 % revenue gains. Before the earnings season began, bottoms -up estimates called for earnings to rise 8%.
As of last Friday, 99% of the S&P 500’s companies had reported Q3 results with ten of the 11 sectors showing positive earnings growth of which three (information technology, financials, and materials) were at double -digit rates. Just one sector had reported negative earnings growth (energy) and that at a low single -digit rate.
The S&P 500 closed last Friday just 0.3% below its most recent all -time high of 6890.9 reached on October 28 of this year and just 3.5% shy of our 7,100 yearend 2025 price target.
Our 2026 year -end target of 8100 for the S&P 500 implies 17.9% upside from where the index closed last Friday (6870) with 14.1% upside from our 2025 year -end price of 7,100 --should it be achieved by the end of this year.
A broadening of the rallies in the S&P 500 which began in 2023 has seen an increase of investor interest in sectors beyond information technology and communications services (a sector that is about 80% tech -related, represented by search engines, streamers and social media companies).
The broadening that has occurred thus far suggests investors have and continue to seek out prudent portfolio diversification and prospects for opportunities in the other nine sectors outside of technology that can benefit from technological innovation today and in the future.
In our view AI remains an ongoing driver of opportunities outside of the information technology and communications services sectors as businesses and consumer s increasingly look to create greater efficiencies and conveniences in a world wherein technology is deeply embedded in day-to-day operations of corporate entities and other institutions as well as in the daily life of the consumer.
Economic data released thus far this year and in the current quarter continue to suggest to us the sustainability of economic growth that has proven resilient if not robust in a highly transitional period of time in market history. Transitions related to a diversification of the global supply chain, the role of technology here and abroad, along with domestic and geopolitical situations that remain in flux provide a period ahead with both opportunities and risk to be navigated over the course of the next year and for some time in the future by investors.
The resilience of the equity market this year has been illustrated through the period from the earlier peak in the S&P 500 reached on February 19th through the rally from the low reached on April 8th , to the rally that ran to October 28th and that now appears to have picked up near term momentum as the end of calendar year 2025 rapidly draws to a conclusion.
At the core of what lies ahead for our 2026 target price to be achieved lies monetary policy, fiscal policy and the continuing progress of innovation and corporate earnings growth all of which have been supportive of stock prices and are key to growing earnings and revenues in the year ahead.
Changes that have occurred and proven favorable for the markets since the end of the Great Financial Crisis, the Covid Pandemic that followed, and through each of the aforementioned transitional factors suggest progress not perfection remains the order of the day with right -sized expectations of how the future will unfold in the year ahead the path to follow
We remain positive on stocks and regard it as our favorite asset class.
We continue to favor cyclical sectors over defensive sectors. Our favorite sectors include: information technology, communications services, industrials, financials , and consumer discretionary.
Regarding the consumer discretionary sector, we note that while surveys of consumer sentiment (soft data) reflect concern by the consumer near term about inflation and the health of the economy, the hard data or sales data persists in showing that the consumer continues to shop if somewhat selectively and at a slower pace reflective of some sensitivity to prices.
Beyond our aforementioned favorite sectors, the utilities sector should garner increased favor as interest rates move lower. The sector is considered by many investors as a bond proxy that can benefit when interest rates move lower. The sector also has appeal as a thematic sector with prospects for the revitalization of the US electric grid a necessity as AI and other technologies increases exponentially the demand for electricity.
In our view, portfolio diversification among asset classes held in portfolios remains an important consideration to meet the needs, goals objectives and tolerance to risk of private investors and the needs of mandate -driven institutions in an environment which remains in transition on a number of levels including: technological innovation, fiscal policy, monetary policy, geo and domestic politics around the world. Fixed income remains, in our view, complimentary to stocks as a source of income and for diversification among primary asset classes.
Chief Investment Strategist, Oppenheimer Asset Management Inc.
John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.
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