Citigroup raised its year-end S&P 500 target from 6,300 to 6,600, signaling that they believe the market still has room to grow in 2025.
That’s roughly a 3% jump from where the index closed around 6,389. They’re counting on recent policy changes and market developments to give corporate earnings a real lift going forward.
The big reason behind Citi’s more optimistic forecast is the tax and spending bill signed on July 4, 2025.
It offers broad corporate tax cuts and makes employee benefits more permanent, which Citi analysts say will help lift corporate profits over the next few quarters.
They also believe that tariff-related challenges especially from the US-China trade back-and-forth have mostly been priced in and won’t drag on earnings as much going forward.
Tech-led market surge
Since hitting a low on April 8, 2025, right after President Trump’s “Liberation Day” tariffs, the S&P 500 has jumped around 32%.
This rally has been driven mostly by strong earnings from the so-called “Magnificent Seven” tech giants, which have led the charge, while other parts of the market are starting to pick up steam too.
Recently, over 81% of S&P 500 companies beat earnings expectations, the highest in seven quarters which gives Citi more confidence that earnings growth can keep going.
Citigroup has also bumped up its earnings per share (EPS) forecasts for the S&P 500 to $272 for 2025 and $308 for 2026, up from earlier estimates of $261 and $295.
They see better profits ahead thanks to tax reforms and solid business fundamentals.
Even though the index is trading near the high end of its usual valuation range, Citi thinks the S&P 500 can hold a forward price-to-earnings ratio around 21 times, thanks in part to a shift toward growth sectors like tech and AI.
Cautious optimism ahead
Scott Chronert from the bank says a few things coming together like tariffs easing, solid earnings reports, ongoing AI investments, and some helpful tax changes have raised hopes for better earnings growth in the second half of 2025.
On top of that, new trade deals with big partners like the EU and Japan have helped boost the market’s mood.
In the best-case scenario, Citi thinks the S&P 500 could climb as high as 7,200 points if companies keep beating earnings expectations and the economy and politics don’t throw any big curveballs.
This guess is based on continued AI-driven progress, big stock buybacks by companies, and steady economic growth even with some uncertainty around policies.
That said, there are still risks like shifting policies, interest rate questions, budget problems, currency moves, and global tensions.
So, the message is to stay cautiously hopeful. Still, the market’s strong run since April and better-than-expected earnings have pushed Citi to raise its expectations.
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