Wall Street calls for stock market rally to continue as corporate profits remain resilient despite tariffs

A stronger-than-expected second quarter earnings season has Wall Street increasingly confident the S&P 500 (^GSPC) has room to run higher in 2025.

In a note to clients over the weekend entitled “Better earnings trigger target reset,” the Citi US equity strategy team led by Scott Chronert boosted its year-end S&P 500 target to 6,600 from a prior forecast of 6,300. Chronert’s team had started the year with a 6,500 target before revising it throughout the spring as the launch of President Trump’s tariffs shook the stock market.

Chronert’s new target reflects about a 4% upside from current levels and would mark a roughly 33% rally for the benchmark index from April lows.

“While we are increasingly confident in the fundamental set up for index, we remain wary that much is already priced in,” Chronert wrote. “Thus, as we’ve been arguing, volatility should be expected, and bought into.”

Chronert’s call doesn’t rely on S&P 500 valuations extending further into historically stretched levels. Instead, Chronert sees earnings growth accelerating more than initially thought. Chronert now sees S&P 500 earnings per share at $272 in 2025 and $308 in 2026, up from $261 and $295 previously.

The bullish outlook for earnings into 2026 should push the S&P 500 to 6,900 by the middle of 2026, per Chronert.

The call from Citi comes as two important trends have emerged during second quarter earnings season. Not only is the S&P 500 handily beating Wall Street estimates for the current quarter, estimates for the final two quarters of the year aren’t dropping like they typically do.

With 90% of the S&P 500 having reported results, earnings in the second quarter are on pace to grow 11.8%, up from the 5% expected on June 27, per FactSet data. Subsequently, earning estimates for the full-year 2025 have also moved higher to a projected year-over-year growth of 10.3%, up from the 9.1% expected on June 27.

“The key takeaway here is that after steady downward revisions to consensus over the past year, we are now seeing a positive inflection,” Chronert wrote. “We expect that tax reform aspects of [One Big Beautiful Bill Act] can still be an upside surprise factor relative to [second half of 2025] consensus.”

Chronert is not alone in becoming more bullish about the outlook for stocks as companies have revealed tariffs aren’t hurting their profit outlooks as much as once feared. Two weeks prior, Oppenheimer chief market strategist John Stoltzfus boosted his year-end target to 7,100 from 5,950 as “progress on trade negotiations removes an uncertainty that had weighed on our market outlook.”