While the S&P 500 Index started 2025 on shaky ground, it ultimately delivered for investors. Through April 8, 2025, the index was down more than 16% on the year. However, the S&P 500 ended up flipping its return, rising more than 16% in 2025. Adding in dividends, the index’s total return was nearly 18%. Below, we’ll review the index’s journey in 2025.
More importantly, we’ll see what Wall Street analysts are forecasting for 2026. By and large, analysts see the index having another solid year, despite many investors holding fears of an “artificial intelligence (AI) bubble."
2025 in Review: Markets Rebound Strongly After Tariff Woes Fade
In late January 2025, Chinese startup Deepseek dominated stock market headlines. The firm claimed it had built its R1 AI model at a fraction of the cost of those developed by U.S. firms. This led to many semiconductor stocks getting hammered due to fears of over-investment in AI. However, the S&P 500 remained relatively stable, dropping only around 1.3% in February.
The index’s descent really began in March, as President Trump ratcheted up his rhetoric around tariffs. Uncertainty surrounding U.S. trade policy was one of the primary reasons that the S&P 500 fell almost 6% in March.
Then, in early April, President Trump held his “Liberation Day” press conference, unveiling steep reciprocal tariffs on many nations. This sparked a massive sell-off, with the S&P 500 dropping 12% from April 2 to April 8. However, the index rebounded over 10% on April 9, as President Trump issued a 90-day pause on most reciprocal tariffs.
While the index faced significant volatility over the coming weeks, it ultimately rose around 5.4% from the beginning of April to the end of May. Trump's decision to soften his tariff proposals eased investor concerns. This helped position the index for a strong year ahead. After May, the S&P 500 posted a positive return in six out of the seven final months of 2025.
Renewed optimism in the AI trade was a big driver of the index’s second-half success. Additionally, the Federal Reserve cut interest rates three times, providing a key tailwind for stocks.
2026 Forecasts: Analysts Eye 10% S&P 500 Upside
Data from Yardeni Research provides a robust view of 2026 forecasts, compiling S&P 500 price targets from over 20 analysts. On average, these analysts see the index finishing 2026 at 7,555. On Jan. 5, the index closed at approximately 6,902. Thus, the average forecast implies just under 10% upside in 2026. Notably, none of the accumulated price targets come in below the S&P 500’s current level. Stifel Nicolaus’s 7,000 target is the lowest of the group but still implies around 1.4% upside. On the other hand, Oppenheimer’s 8,100 target is the most bullish, suggesting that the S&P could rise by over 17%.
Notably, among analysts surveyed in December 2024, the average S&P 500 target for 2025 was 6,614. This average ended up being fairly accurate, coming in just 3.5% below the index’s actual year-end level of 6,845.
However, year-end price targets for 2024 really missed the mark. The average year-end price target was roughly 4,625. This was 27% below the S&P 500’s actual 2024 year-end closing level of 5,822. Yardeni compiled this data for every year since 2021. Interestingly, aside from 2025, the index finished higher than the most bullish analyst target every year.
The S&P 500: A Powerful Tool for Long-Term Investment Success
Just like they are for individual stocks, S&P 500 price targets are just that: targets. None of these analysts has a crystal ball. The index’s performance in 2026 could differ greatly from their estimates, both to the upside and downside. Still, it is good to see that analysts generally have a positive outlook and that their forecasts have tended to be conservative in recent years.
While this data is interesting, investors should remember that the S&P 500’s true power comes from its strong tendency to generate returns over decades, not one year. On Dec. 31, 1999, the S&P 500 Total Return Index closed near 2,021. On Dec. 31, 2025, it closed near 15,220. That’s more than a 7x rise in 25 years. Note that this version of the index includes dividends, while the version in the price target section does not.
The index’s impressive performance comes despite it dropping 23% in 2002, 38% in 2008, and 19% in 2022. Past data does not guarantee future returns. However, it shows how buying and holding the S&P 500 has been a successful strategy, despite several unsettling periods.
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The article "Wall Street’s 2026 Outlook for the S&P 500 May Surprise Investors" first appeared on MarketBeat.
