Asset Management
07/28/2025 Market Strategy
July 28, 2025
Back to the Future
We Reinstate Our S&P 500 Year-End Price Target of 7100
Key Takeaways
- We are revising our year-end price target for the S&P 500 to 7,100 from 5,950 as progress on trade negotiations removes an uncertainty that had weighed on our market outlook. We are also revising our earnings estimate to $275, which implies a price/earnings ratio of 25.8.
- With a third of the companies of the S&P 500 having reported, profits are up 8.3% from a year earlier on revenue growth of 4.8%. Prior to the start of the season, Forbes put expected earnings growth at 4.8% from a year earlier. Five of the 11 sectors are seeing positive earnings growth, with three cyclical sectors (financials, information technology, and communication services) showing double-digit growth.
- This week 161 companies of the S&P 500 are scheduled to report; results of another 126 are due the week of Aug. 3.
- This week also brings the first estimates of Q2 GDP growth as well as readings on consumer confidence and personal income. In addition, the Federal Reserve is set to meet. We expect no change in rates from the July policy meeting.
With the announcement of trade deals by President Trump and his administration (last week with Japan and then the announcement this Sunday by the President of a deal with the EU) we believe that enough “tariff hurdles” have been overcome for now to reinstate our original price target for the S&P 500 of 7100 by year-end.
We note that our reinstated target calls for 11% upside from where the S&P 500 closed last Friday (July 25). We reinstate our earlier earnings projection of $275 for the S&P 500 this year, which implies a forward multiple of 25.8x
Thus far, results for the Q2 earnings season currently underway are showing 84% of companies reported exceeding analyst consensus expectations.
Putting the Price Target in Context
We had initiated our 7100 target on December 9 last year estimating a potential for some 17% upside from that point to the end of year 2025. We considered the target then to be reasonable and even conservative considering the 24.7% percentage gain of the benchmark in 2023 and what was a “20-something gain” by early December in 2024.
That said after the April 2 announcements this year of tariff regimes by the President---which in our view appeared to be much higher than we and many others had anticipated—we reduced our year-end target to 5950 in consideration of what we viewed as potentially very hard lines in the proverbial sand for the administration to negotiate quickly and likely too high a hurdle to traverse for a price target of 7100 tied to year-end 2025.
We also took into consideration the downdraft in stock prices that already had begun on February 19 of this year and would eventually take the S&P 500 down 18.9% from the Feb. 19 high to a post a low on April 8 – and some 15.3% below where it had begun the year.
Solid Fundamentals Prevailing
This year reminds us of the classic Charles Dickens quote, “It was the best of times, it was the worst of times.” Although much uncertainty and worry prevailed for some time both with trade policy and geopolitical events, and given the multitude of potential outcomes, we’d note that cooler heads prevailed – leading to positive outcomes at least for now.
Corporate revenue and particularly earnings growth for Q4 and Q1 for firms in the S&P 500 surprised well to the upside in both Q4 of last year and the first quarter of 2025. Thus far results for the Q2 earnings season currently underway are showing 84% of companies reported exceeding analyst consensus expectations.
Monetary policy by the Fed has brought down the pace of inflation (if not yet to its 2% target level) without thus far causing a recession. This in our view is a substantial achievement considering inflation has gone from 9% in June of 2022 when the Fed recognized that inflation was out of hand to around 2.7% in June of this year.
Where to from here?
This week brings the busiest week of S&P 500 companies reporting results for the season. Some 164 companies across sectors that include widely followed names in information technology, communications services, financials, consumer discretionary, and consumer staples are due to post results for the second quarter.
A heavy calendar of economic data greets investors and traders throughout this week with reports that include metrics on manufacturing, services, vehicle sales, inflation, housing, GDP, consumer sentiment, and culminates on Friday with the non-farm payrolls change as well as the unemployment rate and labor participation rate.
The FOMC decision is due on Wednesday followed by the Fed Chair’s comments and Q&A by the press. We expect no change in rates as progress on reducing the rate of inflation has remained elusive.
Where We Stand
From our perch on the market radar screen, patience and diversification remain key to navigating the markets. Diversification across sectors, market capitalizations, and styles (value vs. growth) with an emphasis on quality in our view can help meet current and future goals and objectives.
Among sectors, we continue to overweight cyclicals over defensive stocks and favor information technology, consumer discretionary, communication services, industrials, and financials. We also maintain some exposure to the energy and materials sectors as demand for these products gains traction as economies show potential to expand globally.
We persist in favoring cyclicals over defensive sectors, maintaining an overweight towards US exposure (we do not foresee an end to US exceptionalism) while maintaining some level of meaningful exposure to both international developed and emerging markets to take advantage of relatively attractive valuations as the world diversifies away from a one-country global supply chain to the benefit of a diverse basket of countries well positioned to gain from what appears to be a secular shift in trade taking place in the post COVID-19 era.
We consider it important for investors to seek out “babies (quality stocks) that get tossed out with the bath water” in market downdrafts as well as a need to maintain a clear head amid day-to-day uncertainty to avoid “missing the signal for the noise.”
Our intermediate- and longer-term outlook for the US economy and the stock market remains decidedly bullish. We believe US economic fundamentals remain on solid footing. As the drag of tight monetary policy eases, job growth and consumption and business fixed investment demand should continue to exhibit.
In our portfolios and recommended allocations, we continue to favor stocks over bonds with an emphasis on US securities while maintaining meaningful exposure to developed international and emerging-market stocks.
Name:
John Stoltzfus
Title: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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