Citi sees S&P 500 at 6,500 in 2025 amid increasing volatility By

-- (NYSE:) projects the to hit 6,atfx official website account opening500 by the end of 2025 in its base case, driven by a mix of earnings growth, a stable macroeconomic backdrop, and sectoral broadening.

However, the Wall Street firm cautions that the road to this milestone will likely be coupled with elevated market volatility compared to the relatively steady performance in 2024.

Citi’s base case assumes mid-single-digit returns, reflecting earnings growth of around 13%, slightly below the consensus estimate of 14%. The bank’s strategists stress that 2025 valuations remain stretched, with downside risks outweighing upside potential. As such, Citi frames this target within a bull case of 6,900 and a bear case of 5,100.

A key factor supporting Citi’s outlook is the continuation of the “no cycle” economic environment. This approach predicts the absence of traditional late or early cycle dynamics, with a supportive Federal Reserve stance and thematic drivers like AI enhancing productivity gains.

“Ongoing soft landing and Artificial Intelligence tailwinds now interact with Trump policy promises, and risks,” strategists led by Scott T. Chronert said in a note.

But despite these positives, the extended valuation starting point implies that investors are already paying for anticipated improvements. This “means more downside to our bear case than upside to the bull scenario,” strategists noted.

Meanwhile, policy uncertainties loom large as former President Trump’s policy platform re-emerges. While tariffs could pose earnings drags in the short term, Citi suggests potential long-term benefits from deregulatory and tax reform initiatives, which may bolster economic fundamentals.

“Our instinct is that policy effects will ultimately prove only marginal to consensus,” the firm said.

Overall, volatility is expected to shape 2025 as investors weigh growth potential against elevated risks.

“We expect more volatility episodes than has been the case this year,” Citi writes, attributing this to euphoric market sentiment and high implied growth starting points. The report advises investors to use market pullbacks tactically, particularly to shift into underperforming sectors or mid- and small-cap stocks.

As the bull market enters its third year, Citi emphasizes the importance of broader participation beyond mega-cap stocks to sustain gains. While the Magnificent Seven have driven much of the rally, the report notes that the “Other 493” are trading at historically elevated valuation levels, demanding robust earnings contributions to justify further price increases.

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