Macroeconomic uncertainty and evolving policies under the Trump administration may lead to short-term market volatility, but Evercore ISI views these fluctuations as opportunities to increase exposure to the S&P 500, according to a note released Sunday.
Evercore forecasts the S&P 500 (SPX) to reach 6,600 by mid-2025, despite its current high valuation of 25x forward earnings. The firm acknowledges that such elevated valuations make the index particularly sensitive to macroeconomic developments.
“Higher volatility is expected as the administration’s ‘Move Fast, Break Things’ strategy to revitalize the U.S. introduces uncertainties around tariffs, immigration policies, and bond yield movements,” wrote strategists led by Julian Emanuel.
“However, near-term market disruptions present a chance to add exposure, with SPX on track for 6,600 by June 2025. Valuations for key tech stocks remain under control, and increasing AI adoption will bolster sentiment,” they added.
Evercore highlights several positive factors driving SPX growth, including stable valuations for the “Mag 7” tech giants and the accelerating adoption of AI. The firm projects that AI adoption among large companies will reach 25% by the end of 2025, serving as a key catalyst for investor sentiment.
While market volatility is likely to persist, Evercore maintains that underlying fundamentals support a bullish outlook. The firm advises investors to align with its “Fed Rate Cut Playbook,” favouring technology, communication services, consumer staples, and small-cap stocks. These sectors are expected to thrive as the Federal Reserve, anticipated to cut interest rates three times in 2025, begins easing monetary policy.
The stock market has steadily reached new highs this year, with the most recent peak occurring after the Presidential Election. However, analysts highlight that the Advance-Decline (A-D) Line has not followed this upward trend, despite breakouts in both large-cap and small-cap stocks. This divergence underscores their expectation of short-term market volatility.
