Market Volatility and Predictions

Volatility has returned to the stock market. It’s been a choppy start to 2025, and after two straight years of 20% returns, investors are asking if we can keep it up.

Well, the consensus from the experts is yes. At least, the consensus from the experts LPL Research averaged for us.

Wall Street’s 2025 S&P 500 Forecast

Wall Street has significantly upped their 2025 forecast for the S&P 500 index over the past few months. Strategist price targets currently range from 6,000 to 7,100. The average price target for the end of 2025 is 6,614. That would be an almost 12% return from where the Index sits as we record this segment.

LPL points out that there are lots of things driving Wall Street strategist optimism. Inflation still moving in the right direction, and corporate earnings climbing to double-digit growth rates are two of the big ones.

Historical Market Performance After Big Gains

It’s human nature to think what goes up must come down, especially after two straight years of 20% gains. But, Ryan Detrick, Chief Market Strategist for Carson Group, shares his research that shows big years are often followed up by big years.

Check out this chart.

In any year, the S&P 500 Index is up, on average, 9.5%, and is positive 72% of the time. In the year following a 20% gain, the Index is up 10.6% on average, and higher 81% of the time. In the year following back-to-back 20% gains, it’s up 20% on average again. And is positive 100% of the time. Now, it’s important to point out the Index has only produced back-to-back 20% gains 4 times in history, so it’s a small sample size.

Accuracy of Wall Street Predictions

Back to those Wall Street predictions: LPL wondered how often those price targets are right? The answer is not often.

Here’s a graph comparing the average strategist price target with the actual index performance over the past decade.

The bars line up only once, in 2016. LPL tells us analysts actually underestimated market performance in every year since 2019, with the exception of 2022.

Going back to 2004, analysts have overestimated year-end forecasts by an average of 7%, and underestimated the Index return in only 7 of the past 20 years.

Long Term Investment Strategy 

Bottom line is the best minds in the industry are most often wrong when it comes to predicting market returns over the short term. But, stocks have been generally predictable over the long-term. This make our case that stocks should be considered long-term investments. Nobody knows specifically what will happen in any given year, but, investing in stocks over a long time horizon is the best way to reach your financial goals.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance. Independent Advisor Alliance and GenWealth Financial Advisors are separate entities from LPL Financial.