Wall Street is divided on the future of stocks. Here are bull and bear cases from the biggest banks.

Things are looking great for the US economy.

Inflation is falling, productivity is rising, and the Federal Reserve is easing monetary policy, which should act as a tailwind for economic growth.

Economists have shifted from arguing about the possibility of recession to forecasting whether a “soft landing” or “no landing” is more likely. It seems the debate is simply about how fast the economy can grow from here.

But the outlook for the stock market is less clear, with major Wall Street banks still divided on whether stock prices have further room to run.

Stocks are trading near record highs, with the S&P 500 on track to deliver back-to-back annual gains of more than 20%.

Among the top analysts at Wall Street banks, there’s some disagreement about whether all of the good news is priced in already or whether the market can continue to rise beyond already lofty valuations.

On the one hand, most see the gains set to continue, pushing past election uncertainty and continuing to lift stocks into 2025. Beyond that timeline, however, uncertainty builds and outlooks get murky.

Here’s what Wall Street is saying about the prospects for the stock market heading into 2025 and beyond.

The Bulls

A slew of Wall Street banks are chasing the record rally in the stock market this year, boosting their S&P 500 year-end price targets to play catch-up.

Strategists at UBS increased their S&P 500 price targets in a note last week, expecting the S&P 500 to hit 6,300 by June 2025 and 6,600 at the end of next year.

That represents potential upside of 8% and 13%.

UBS’s head of US equities David Lefkowitz said “healthy” earnings growth would pave the way for further stock gains.

“Third-quarter earnings season has started on a positive note with bank management teams highlighting that consumer spending remains healthy and consistent with normal economic growth,” Lefkowitz said.

The bank said improving inflation, more Fed rate cuts, and accelerating investment in artificial intelligence should all help support the stock market next year.

Strength begets more strength, and that’s a big part of the BMO strategist Brian Belski’s bullish outlook for stocks into 2025.

Belski increased his year-end S&P 500 price target to 6,100 from 5,600 last month, making him one of the most bullish strategists on Wall Street.

“We continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted,” Belski said in the note.

He’s also encouraged by the broadening out of the stock market rally, as it’s no longer concentrated in a handful of tech giants. That’s healthy behavior for sustainable stock market gains, according to the note.

“This is a trend we expect to continue and should help to support future market gains even if the price and fundamental performance of Mag-X stocks continues to decelerate in the months ahead,” Belski said.

The Bears

The bearish strategists on Wall Street are sticking to their views even after being wrong all year. Their top worry is the potential for fewer interest rate cuts than expected and growing AI hype that might fail to deliver.

JPMorgan strategists have held firm to their bearish S&P 500 year-end price target of 4,200, which represents a potential downside of 28% from current levels.

In a note earlier this month, the JPMorgan strategist Dubravko Lakos-Bujas conceded that a recession seemed off the table but said that AI investments were unlikely to pay off with lingering questions around monetization issues.

Additionally, investor expectations of a Federal Reserve that is about to embark on a string of interest-rate cuts could be disappointed if the economy continues to stay resilient, as it would limit the Fed’s ability to cut rates, most likely putting downward pressure on stock prices.

Finally, JPMorgan warned in a note Monday that third-quarter earnings had seen a flurry of estimate downgrades as sell-side analysts lowered their expectations.

“Earnings downgrades have been significant,” JPMorgan said, adding that they “appear to be worsening.”

The Stifel strategist Barry Bannister has warned investors about the prospect of a plunge in the stock market in 2025.

Elevated valuations, unfounded expectations for more Fed rate cuts, and hype for AI that ultimately falls short of expectations could create a perfect storm for lower stock prices next year.

“We took a clean sheet look at the equity market and came away with the same smh (shaking my head) emoji reaction. Despite all the soft-landing and Fed rate cut optimism, the S&P 500 up almost 40% y/y has simply over-shot,” Bannister said.

While the strategist acknowledged a “mania” could take hold in the market and push stock prices even higher from here, he said it would ultimately end with a crescendo and then a fresh swing to the downside.

“Sure, we can cherry-pick with the best of them and apply the most over-valued cyclically adjusted valuation level of the past 35 years to show about 10% further upside, but that same analysis of a century of manias also returns the S&P 500 in 2025 to where 2024 began (down 26% from that prospective peak),” Bannister said.

Somewhere in between

The Goldman Sachs strategist David Kostin is bullish, at least in the short term.

The bank’s chief stock strategist recently increased his year-end S&P 500 price target to 6,000 on the prospect of further growth in corporate earnings.

“The primary driver of the upward revision to our 2025 EPS estimate is greater margin expansion,” Kostin said. “The macro backdrop remains conducive to modest margin expansion, with prices charged outpacing input cost growth.”

And yet, Kostin also argues that a golden era of stock market returns is probably over.

In a note over the weekend, Kostin issued his 10-year forecast for the stock market. He said a combination of extreme market concentration and high valuations suggested the S&P 500 would deliver annualized returns of just 3% over the next 10 years. That’s compared with the S&P 500’s annualized return of about 13% over the past 10 years.

“Investors should be prepared for equity returns during the next decade that are towards the lower end of their typical performance distribution relative to bonds and inflation,” Kostin said.

Goldman also sees stocks struggling relative to other assets over the next decade. The bank says the S&P 500 has about a 72% chance of trailing bond-market returns and a 33% probability of lagging inflation through 2034.

His long-term view aligns with other bears who fret that the coming decade will look much worse than the last. Stifel’s Bannister has also argued for a “lost decade” for the stock market.