A stronger-than-expected second quarter earnings season has Wall Street increasingly confident the S&P 500 (^GSPC) has room to run higher in 2025.
In a note to clients over the weekend entitled “Better earnings trigger target reset,” the Citi US equity strategy team led by Scott Chronert boosted its year-end S&P 500 target to 6,600 from a prior forecast of 6,300. Chronert’s team started the year with a 6,500 target before revising it throughout the spring as the launch of President Trump’s tariffs shook the stock market.
Chronert’s new target reflects about a 4% upside from current levels and would mark a roughly 33% rally for the benchmark index from April lows.
“While we are increasingly confident in the fundamental set up for index, we remain wary that much is already priced in,” Chronert wrote. “Thus, as we’ve been arguing, volatility should be expected, and bought into.”
Chronert’s call doesn’t rely on S&P 500 valuations extending further into historically stretched levels. Instead, Chronert sees earnings growth accelerating more than initially thought. Chronert now sees S&P 500 earnings per share at $272 in 2025 and $308 in 2026, up from $261 and $295, respectively.
The bullish outlook for earnings into 2026 should push the S&P 500 to 6,900 by the middle of 2026, per Chronert.
The call from Citi comes as two important trends have emerged during the second quarter earnings season. The S&P 500 is handily beating Wall Street estimates for the current quarter, and estimates for the final two quarters of the year aren’t dropping like they typically do.
With 90% of the S&P 500 having reported results, earnings in the second quarter are on pace to grow 11.8%, up from the 5% expected on June 27, per FactSet data. Subsequently, earnings estimates for full-year 2025 have also moved higher to a projected year-over-year growth of 10.3%, up from the 9.1% expected on June 27.
“The key takeaway here is that after steady downward revisions to consensus over the past year, we are now seeing a positive inflection,” Chronert wrote. “We expect that tax reform aspects of [One Big Beautiful Bill Act] can still be an upside surprise factor relative to [second half of 2025] consensus.”
Chronert is not alone in becoming more bullish about the outlook for stocks, as companies have revealed tariffs aren’t hurting their profit outlooks as much as once feared. Two weeks prior, Oppenheimer chief market strategist John Stoltzfus boosted his year-end target to 7,100 from 5,950, as “progress on trade negotiations removes an uncertainty that had weighed on our market outlook.”
On Monday, DataTrek co-founder Nicholas Colas pointed out that the trends seen in second quarter earnings support the benchmark index’s recent run to a fresh record high.
“Not only has Q2 earnings season been strong, but it has also been enough of a surprise to the Street to push S&P 500 earnings estimates higher for the year,” Colas wrote. “This is an unusual, and very bullish, development which goes a long way to explaining why US large caps are so resilient right now.”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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