UBS Predicts S&P 500 Could Reach 6,600 by 2025 Amid Over-Easy Global Central Bank Policies

Global central banks are currently easing their monetary policies, a trend that is becoming increasingly noticeable despite experiencing solid economic growth, high asset prices, and significant inflation levels. This observation was pointed out by Bob Elliott, who serves as the chief investment officer at Unlimited Funds.

The current situation: Elliott highlighted that historically, central banks have tended to ease policies primarily during economic downturns, such as after the COVID-19 pandemic, during the financial crisis, the tech bubble burst, and the 1998 crisis.

As of the end of 2024, it is anticipated that nearly 80% of major country central banks will have moved to an easing mode. Elliott shared this insight on X (formerly Twitter) and included a graphic showing past peaks in easing during similar situations.

Additionally, Elliott mentioned that "Policy easing is set to add another 100bps of easing in 2025 to the 100bps already implemented over the last year." He emphasized that there appears to be little need for aggressive easing since the global economy is performing strongly.

Implications for the market: This approach to easing monetary policy has major implications for the stock market, where increased liquidity typically results in higher asset prices. Mark Haefele, chief investment officer at UBS Global Wealth Management, characterized the current decade as the "Roaring 20s," a period marked by strong growth, impressive market returns, and increased productivity.

In UBS's 'Year Ahead 2025 Report,' Haefele projected that the S&P 500 could reach 6,600 by the end of 2025, estimating this to be about a 10% increase from current levels. This optimistic outlook is based on the expected continuation of strong economic conditions and central banks likely cutting interest rates further in the approaching year, which would reduce returns on cash.

Specifically, Haefele noted, "In our base case, we expect sustained economic growth in the U.S., supported by healthy consumption, loose fiscal policies, and lower interest rates. Although tariff threats might pose challenges for Asia and Europe, any potential impacts might be mitigated through responsive stimulus measures in China."

In summary, the current global monetary landscape indicates that easing policies are set to continue, supporting the overall bullish sentiment for markets like the S&P 500 as we look toward 2025.

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