U.S. stocks have declined recently, with the S&P 500 retreating to around 6400 points on Tuesday morning from its record close of 6501 on Friday. Traders have been taking profits after the index gained 16% year-to-date through last week. Despite the pullback, some analysts remain bullish, predicting that the S&P 500 could climb to 9000 points by the end of next year.
In a Tuesday note, Julian Emanuel, an analyst at Evercore ISI, suggested that even if the market experiences a downturn by the end of 2025, stocks could be poised for a “twice in a lifetime bull run” that may drive the S&P 500 to as high as 9000 points.
Emanuel believes that the adoption of artificial intelligence (AI) is expected to significantly boost corporate earnings, and combined with the Federal Reserve’s accommodative monetary policy, this could continue to drive tech stocks and the broader market higher—potentially even creating the biggest bubble ever. He stated that AI is bigger than the internet, noting that nearly three years after the launch of OpenAI’s ChatGPT, its impact has already touched all parts of society and industry, even as adoption is still in its early stages.
More importantly, Emanuel anticipates that the Fed will turn dovish early next year, further powering the market upward. However, he emphasized that this scenario depends on the economy experiencing tepid growth and sticky inflation.
Analysts suggest that if the market falls further, it could present investors with another opportunity to enter the bull market. Thanks to the potential for continued earnings growth, the S&P 500 is expected to keep advancing. Investors should note that large tech companies are still in the early stages of benefiting from AI. Earnings are likely to grow consistently in the coming years, especially as data center investments continue to drive chip demand and businesses and consumers increasingly adopt AI-driven digital and software capabilities.
The S&P 500 currently trades at about 22 times estimated earnings for the next 12 months (forward P/E ratio), slightly below the peak seen in early 2023 when the AI boom began. If the index falls to the key support level of 6238, the valuation would drop to around 21 times, which is closer to the median range of the AI era.
The 6238 level is critical because buyers stepped in to stabilize the index at that point in early August after a mild pullback. If Tuesday’s losses moderate, it would indicate that selling pressure is easing and that the 6238 support level may hold once again. If the index declines further toward the 6000 zone, investors might consider buying, as that level is near the 200-day moving average (around 5960). Historically, the S&P 500 has stabilized near its 200-day moving average unless there is a major unforeseen catalyst, such as the imposition of new tariffs earlier this spring.
Investors should look for buying opportunities during market pullbacks—which could emerge soon.
