Evercore: ‘Animal spirits’ will push S&P 500 to 6,600 Provided by Investing.com

Investing.com – Evercore ISI predicts that the S&P 500 Index (S&P 500) will reach 6,600 points by mid-2025, driven by the “animal spirits” inspired by the U.S. election results. “Animal spirits” refers to the way humans are driven by emotions to make financial decisions during periods of uncertainty and volatility.

Trump won the 47th U.S. election, and U.S. stocks also experienced the largest rise after election day in more than a century. The S&P 500 closed sharply up 2.5%, while the small-cap index Russell 2000 soared nearly 6%.

However, Evercore ISI analyzes that this favorable market reaction is not just a short-term rebound, but marks the beginning of a broader “performance chase”, which may significantly improve market performance in the coming months.

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Small-cap stocks, especially those in the Russell 2000 index, are seen as a key force in the rally. Evercore ISI noted that there are “coverage” opportunities for small-cap stocks, which have lagged the major indexes since reaching all-time highs in 2021.

Factors such as easing inflation, easing financial conditions and expected interest rate cuts from the Federal Reserve are expected to boost the performance of small-cap stocks.

“Small-cap stocks were among the sectors that benefited the most,” said Evercore ISI. They emphasized: “The Russell 2000 Index’s premium to the S&P 500 Index is 19%, which is lower than the average premium level of 32% over the past 10 years.” This indicates that the index’s valuation is attractive and may drive its continued rise.

From an industry perspective, Evercore ISI believes that the technology and communications services industries, as well as more defensive industries such as consumer staples and healthcare, especially software and biotech, will be the main beneficiaries.

Evercore ISI’s optimistic outlook on U.S. stocks is also supported by policy developments from the Federal Reserve. The investment bank expects a 25 basis point rate cut in December, one cut per quarter in 2025, and a pause after September.

Strategists said last week’s election was “significant.” In a surprise victory in what was expected to be an unusually close race, Trump won key battleground states, secured a Senate seat, a likely House majority and won the popular vote.

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Compiler: Liu Chuan