Wells Fargo Investment Institute has increased its year-end 2025 target for the S&P 500 index to a range of 6,500–6,700. This new target is higher than the previous range of 6,200–6,400 and reflects expectations for stronger economic growth and favorable policy changes. The bank has also raised its forecast for earnings per share (EPS) for the index to $275, up from $270.
This adjustment comes as Wells Fargo updates its outlook for the U.S. economy in 2025, now predicting GDP growth of 2.5%, compared to its earlier estimate of 2.3%. The revised forecast is based on higher consumer confidence driven by increased household wealth and a strong stock market. Additional support is expected from extended provisions under the Tax Cut and Jobs Act and potential deregulation, which the bank believes could boost corporate profit margins.
Despite these positive factors, Wells Fargo warns that proposed tariffs could increase inflation and push interest rates higher toward the end of 2025, offsetting some of the economic benefits.
Wells Fargo has also raised its targets for mid and small cap stocks. The Russell Midcap Index is now expected to reach 4,100–4,300 by the end of 2025, up from the previous forecast of 3,900–4,100. Similarly, the Russell 2000 Index is projected to finish the year at 2,700–2,900, compared to the earlier range of 2,500–2,700. Although the EPS forecast for small-cap stocks was slightly lowered due to weak 2024 earnings, the bank expects small caps to benefit from improving economic conditions later in 2025.
The bank’s outlook also considers possible policy changes under a new administration, such as tariffs and immigration reforms. These measures could lead to inflationary pressures, with the Consumer Price Index (CPI) now forecast to rise to 3.3% by the end of 2025, up from the previous target of 3.0%. Wells Fargo expects new tariffs on China and other trading partners to gradually take effect, with the most significant economic impacts likely emerging in late 2025 and extending into 2026.
Wells Fargo’s revised forecast highlights a mix of opportunities and challenges as economic and policy shifts shape market conditions leading into 2025.
