Revealed: how high the S&P 500 could go in 2025

A “Roaring 20s” decade that’s so far brought strong market returns, economic growth and technological advances has been backed to continue by a leading City bank.

UBS’ base case in its Year Ahead 2025 publication points to further momentum in equities, fuelled by falling interest rates, solid economic growth and continued innovation.

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The S&P 500 index is forecast to reach 6,600 by the end of 2025, representing a 10% price return from current levels. However, the bank warns that tariffs and geopolitical uncertainty are likely to contribute to volatility for European and Chinese markets in the year ahead.

Since the start of the 2020s, global equity markets have risen by around 50%, US nominal GDP has increased by over 30% and American corporate profits are up nearly 70%.

That’s despite global lockdowns, the outbreak of wars in Eastern Europe and the Middle East and the largest spike in interest rates and inflation in decades.

At the midpoint of the decade, chief investment officer Mark Haefele said the key question is whether US political change will extend or end what’s been dubbed the Roaring 20s.

Haefele said: “The upside scenario would see lower taxes, deregulation, and trade deals adding to a positive market narrative built on solid growth and continued investment in artificial intelligence (AI).

“The risk scenario is that trade tariffs, excessive fiscal deficits, and geopolitical strife will contribute to higher inflation, weaker growth, and market volatility.”

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Haefele added that the unpredictability of the decade so far should remind investors of the “importance of humility and market diversification”.

But he also said it should “remind us of the adaptability of the economy, the power of innovation, and the potential for long-term market growth”.

The bank’s base case with a 50% probability is that Wall Street equities rise as US growth is supported by deregulation and improved business confidence, more than offsetting the impact of selective tariffs on Chinese and key European imports.

With central banks poised to cut interest rates further, it recommends investors put cash to work in investment grade bonds, diversified fixed-income strategies and equity income strategies to sustain portfolio income.

The bank continues to believe that AI is positioned to be the investment opportunity of the decade. To capitalise, investors should focus on both listed mega-caps and innovative private companies.

Rising electricity demand and decarbonisation goals should also create a significant long-term opportunity in companies related to power and resources.

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While tariffs are a concern, they should not completely overshadow the opportunities outside the US. In Europe, the bank expects Spain, the UK, and Switzerland to outperform France and Germany with growth rates of approximately 2.3%, 1.5% and 1.3% respectively.

In commodities, UBS forecasts that gold will break new highs as an effective hedge against political concerns such as government debt levels, inflation and global tensions. It predicts $2,900 an ounce by the end of 2025 and recommends a 5% allocation to gold as a diversifier.

The bank anticipates higher prices for “transition” metals such as copper, lithium and nickel and also thinks the outlook for global residential and commercial real estate is bright amid constrained supply and rising demand. However, affordability issues mean it is less optimistic about the UK residential market.

The bank’s bull case carries a 25% probability, with the S&P 500 index seen reaching 7,000 as markets surge on the bank of strong US growth and AI optimism.

The bear cases show the S&P 500 falling to 5,100 in the event of a full-blown trade war and 4,500 in the event of a hard landing for the US economy caused by weak consumer spending and deteriorating labour market.