Cailian press reported on November 29 (editor Liu Rui) as the end of the year approaches, many investment banks on wall street have released their outlook reports for the usa stock market in 2025, and almost all mainstream investment banks expect the usa stock market to continue to rise next year. Among them, deutsche bank is likely the most optimistic. They set the target price for the s&p 500 index at 7000 points by the end of 2025, the highest point announced by any mainstream investment bank.

However, this week, deutsche bank warned that despite the expectation of a strong rise in the usa stock market next year, the road ahead may not be smooth, and there may still be three major stumbling blocks that could hinder the rise of the usa stock market.

Deutsche bank macro strategist henry allen wrote: "Although the market appears to be rock solid at the moment, it is worth remembering that the usa stock market has actually experienced several periods of turbulence this year... Therefore, considering the usa stock market's responses to various shocks this year, it is clear that any of these factors could trigger a new round of selling, especially if they become a more persistent problem."

He added: "Since the current valuation of the usa stock market is higher compared to the past few years, this means that the room for further increases is now more limited."

The following are the three major factors that may hinder the rise of the usa stock market.

1. Economic downturn risk

Despite most economists believing that the usa economy is on a path toBut after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.On the current trajectory, inflation can cool without triggering a severe recession. However, Allen warned that if the usa's economic weakness exceeds expectations, it will pose a significant risk to the stock market.

He mentioned that this summer, the usa stock market experienced a significant sell-off due to weak employment data and concerns that economic growth might stagnate after the federal reserve's prior aggressive interest rate hikes.

"Fortunately, usa economic data also bottomed out this summer and then began to improve, which helped to restore market sentiment. But the fact is, even though the economic data at that time did not point to a recession, the usa stock market still faced considerable sell-offs, which raises a question: how severe will the situation be for the usa stock market if next year's economic data indeed starts to indicate a recession? After all, we know that for risk assets, a recession is one of the worst-case scenarios."

Allen indicated that the market's growth expectations for the usa economy in 2025 are also "much higher" - Wall Street expects the usa's GDP growth to remain above 2% next year. This means that next year's economic data will be harder to meet or exceed market expectations.

2. Geopolitical turmoil

Earlier this year, geopolitical tensions in the Middle East escalated, causing oil prices to soar and stock prices to plummet. Last week, as the Russia-Ukraine conflict intensified, the usa stock market also experienced a drop.

"Therefore, the market is clearly very anxious about any geopolitical escalation. However, in previous situations, the most pessimistic fears of conflict escalation did not materialize. Yet, if new conflicts or significant escalations occur in the future, we know from recent experience that the market could react very negatively, just like when the Russia-Ukraine conflict erupted in 2022."

3. Inflation intensifies.

Currently, the inflation rate in the usa has retreated from around 9% in September 2022. In October this year, the usa consumer price index (CPI) increased by only 2.6% year-on-year, in line with economists' expectations, although it accelerated slightly compared to last month.

However, earlier this year, any signs that inflation might start to rise again triggered market panic, leading to declines in the usa stock market, sell-offs of ​bonds, and weakening expectations for the federal reserve to cut interest rates.

Allen stated that if inflation in the usa continues to remain high in the future, such panic scenarios are likely to reoccur. Especially after Trump won the election, there are concerns that his policy stance might reignite price increases, forcing the federal reserve to adopt a tougher stance.

"As we move into 2025, this risk grows. Fortunately, we have avoided the persistent inflation of the 1970s. However, in the usa, even now, the inflation level remains above the target. Our economists predict that overall and core personal consumption expenditures (PCE) in the usa should stay above 2% in 2025 and 2026," Allen noted.

Some Wall Street forecasters warn that since the usa stock indices are hovering near historical highs, the recent market trends seem to have overshot. However, according to the latest AAII investor sentiment survey, only 33% of investors are bearish on the stock market for the next six months, and analysts from large banks are generally optimistic about forecasts for the next year.