With 2024 in the rear-view mirror, global capital markets open a new chapter in 2025 with a mix of possibilities and uncertainties. Here, FactSet experts share their views on what to watch across S&P 500 earnings, AI, Washington, ETFs, fixed income, wealth management, utilities, and oil.
John Butters, Vice President and Senior Earnings Analyst
Analysts expect the S&P 500 to report double-digit earnings growth in CY 2025. The estimated (year-over-year) earnings growth rate for CY 2025 is 14.8%, which is above the trailing 10-year average (annual) earnings growth rate of 8.0% (2014 – 2023).
It is interesting to note that analysts believe earnings growth for companies outside the “Magnificent 7” will improve significantly in 2025. While analysts expect the “Magnificent 7” companies to report earnings growth of 21% in 2025, they expect the other 493 companies to report earnings growth of 13% for 2025. This 13% earnings growth for CY 2025 reflects a substantial improvement to analyst expectations of just over 4% earnings growth for these same companies for CY 2024.
All eleven sectors are predicted to report year-over-year earnings growth in CY 2025. Six of these sectors are projected to report double-digit growth: Information Technology, Health Care, Industrials, Materials, Communication Services, and Consumer Discretionary. Two other sectors (Financials and Utilities) are projected to report year-over-year earnings growth of 9%.
In terms of revenues, the estimated (year-over-year) revenue growth rate for CY 2025 is 5.8%, which is above the trailing 10-year average (annual) revenue growth rate of 5.1% (2014 – 2023). Ten of the eleven sectors are projected to report year-over-year growth in revenues, led by the Information Technology sector. On the other hand, the Energy sector is the only sector expected to report a (slight) year-over-year decline in earnings.
The estimated net profit margin (based on aggregate estimates for revenues and earnings) for the S&P 500 for 2025 is 13.1%, which is above the 10-year average (annual) net profit margin of 10.8%. If 13.1% is the actual net profit margin for the year, it will mark the highest annual net profit margin reported by the index since FactSet began tracking this metric in 2008. The current record is 12.6%, which occurred in CY 2021.
View our full S&P 500 CY 2025 earnings preview.
Ryan Roser, Head of AI and Machine Learning
As we move into 2025, investment professionals will leverage solutions developed in the last year to increase automation with AI. Initially, we'll see them using specialized applications with generative AI features. However, as confidence in AI increases, fully delegating tasks to autonomous agents will become the norm.
As AI redefines our interaction with technology, two major trends will emerge. First, while AI empowers professionals, human adaptability remains unmatched. Expect shifts in behaviors—like adjusting language and workflows—to seamlessly integrate with AI systems. Second, increased awareness of AI will lead some professionals to diversify their work, distinguishing their outputs with a human touch to capitalize on authenticity.
The growth in agent usage will also trigger a rise in agents interacting with other agents, driving a need for advanced coordination technologies. This will lead to a focus on developing systems for agent interaction, including entitlements, federation, and communication standards. Also expect renewed focus on robust content and data assets, as they form the backbone of effective AI agent deployment.
Looking at LLMs, expect continuous advancements in 2025. Larger models with superior reasoning and multimodal abilities will emerge, sparking debates around realization of artificial general intelligence (AGI).
Michele Lieber, Senior Vice President, Global Head of Government Affairs and Regulatory Strategy
The start of 2025 is shaping up to be politically intriguing, and the momentum is expected to carry through the coming months. The 119th Congress is poised with a slim Republican majority in the U.S. House of Representatives and a 53-seat hold in the Senate, marking the first time since 2017 that Republicans will have unified control of both chambers. This opens the door for an agenda of reconciliation, a legislative tool that enables certain bills to pass with a simple majority vote, bypassing the usual 60-vote threshold in the Senate. This will be especially significant given that numerous pressing matters are expected to require Congressional action.
Several key votes are on the horizon, driven by time-sensitive issues such as expiring tax credits and the looming debt ceiling. As we saw in late 2024, government funding came dangerously close to a shutdown, narrowly avoided by a last-minute short-term funding patch. As these deadlines approach, it will be challenging to carve out time for non-urgent legislative matters, though Congress has the power to alter these deadlines at any time, including those surrounding the debt ceiling.
In the coming months, there are five key areas where Congressional action will be crucial: addressing the debt ceiling and short-term funding, extending expiring tax credits, securing federal health insurance subsidies, and meeting government spending deadlines. Alongside these, oversight investigations and key issues in foreign relations, digital assets, and tariffs will remain at the forefront of legislative efforts, with close coordination between Congress and the incoming Trump Administration. And as the Senate Banking and House Financial Services Committees gear up for a fast-paced period from January to July, focus areas will include digital assets/ cryptocurrency, fintech, AI, and other emerging technologies influencing the financial services industry.
After the Inauguration on January 20, momentum will build for nomination hearings and the appointment of key staff for the new Administration. We will be following and analyzing every development closely as it unfolds.
Elisabeth Kashner, VP, Director of Global Fund Analytics
Lois Gregson, Senior ETF Analyst, Global Fund Analytics
The ETF industry is poised for continued significant evolution, with an impressive surge in ETF launches—almost 750 in 2024. As investors and advisors remain sharply focused on minimizing expenses and maximizing tax efficiencies, the trend of introducing innovative asset management solutions is likely to persist. As long as equity markets remain strong, the rate of ETF closures tends to remain low, further supporting this proliferation.
In the realm of cryptocurrency, with Donald Trump's known stance, the influx of over $41 billion in net new assets into cryptocurrency funds underscores growing investor interest. This suggests a probable rise in the launch of trend-driven ETFs such as those combining Bitcoin with hedging strategies, diversified asset class stackings, and other alternative investments for fear of missing out.
Amid discussions on potential cuts to Social Security and Medicare, demographics indicate a heightened focus on retirement planning. Consequently, there is an anticipated increase in products emphasizing hedge strategies, defined risk, and structured income generation to pursue these needs.
Furthermore, with the uncertainty surrounding the future of the 2017 Tax Cuts and Jobs Act (TCJA), tax efficiency remains top of mind for investors. The continued popularity of tax-focused strategies, as evidenced by products like the Cambria Tax Aware ETF (TAX), signals an uptick in actively managed ETFs. This movement is bolstered by a rise in conversions from mutual funds and separately managed accounts to the ETF structure, paving the way for both organic growth and a push for ETF share class approval.
Overall, 2025 is shaping up to be a transformative year, highlighting the strongest aspects of the ETF structure: innovation, cost-efficiency, and strategic tax management.
Pat Reilly, Senior Vice President, Senior Director, Mid Office - Americas
Whether attributable to policy shifts with a new administration, post-pandemic capex and consumption continuing to play catch up, fund flows driving demand for credit in all shapes and sizes, or something else, inflation remains sticky during the first half of the year. The Fed does cut twice, but only later in the fall.
Term premium returns! As of December 31, 2024, the 10y-2y spread had widened to 33 bps. While this is nearly double the average spread seen over the pandemic and initial post-pandemic period, it is well below the 100-bps average spread historically seen over the past 38 years, implying another 70 bps of widening. Per my first prediction, assume most of this widening is driven by higher longer-term rates, meaning pain for longer duration treasuries and little refinancing relief for the highest risk borrowers.
The USD remains strong, reaching parity with the Euro and revisiting recent highs relative to the Yen. GBP retains relative strength before capitulating over the summer as ruminations of austerity fade.
Greg King, Senior Director, Wealth Management
Wealth management has become trendy! An industry historically characterized as “slow and steady” enters 2025 with real momentum. Technology is driving much of this evolution and provides an impetus for the emergence of two wealth management megatrends.
AI finds a home. In 2025, we expect to see AI deliver tangible outcomes in the form of co-pilot utilization and distribution of a firm’s intellectual capital to an increasingly digital and mobile client. Putting the firm’s best ideas and insights directly in the hands of the client will not dis-intermediate advisors. Rather it will strengthen their voices, delivering impact that will travel further, wider, and more quickly than ever before. One very tangible business outcome of this trend will be an opportunity for wealth managers to unlock the retail segment of the marketplace, controlled today by the likes of Schwab, Fidelity, and newcomers like Robinhood and Revolut.
Asset and wealth managers get serious about client engagement. The looming shadow of generational wealth transfer, further fee compression, and competition from digital competitors will increase the focus on client satisfaction. Fund managers have been dealing with fee pressure, which will accelerate an emerging trend toward direct engagement with retail customers by upgrading their portal experiences with digital reporting and strategic insights. Wealth managers will follow that same path and incorporate trading tools and signals into client portals. In addition, we expect to see wealth managers tap the treasure trove of client data in their CRM for personalized client and prospect engagement. Technology is well placed to connect this unstructured data to advisor actions. It can help identify client behaviors that may indicate retention risks, leverage relationship maps for prospecting opportunities, and automate production of scripted communications for appropriately timed client or prospect nudges.
Jim Kahler, Head of Utilities and Regulation
Utilities and utility investors spent 2024 scrambling to understand the physical and financial implications of AI data center-driven power demand. This evolution is in the early stages, and many unknowns remain going into 2025: Will utilities be able to add power generation at the rate required by data center builders? How will tariffs be designed to avoid placing the cost burden on residential ratepayers? How will utilities finance this growth, and which companies are in the best position to issue equity? How will regulators accommodate the largest and most rapid power generation buildout since the mid-20th century? The list goes on.
Most utilities go through a long-term resource planning process with regulatory only every three-to-five years. As such, most utilities haven’t even done the detailed power system and resource plan modeling reflecting this higher load growth environment. Expect to see major revisions for utilities that file resource plans this year.
On the regulatory front, state-level utility commissions will continue to walk the fine line between balancing consumer and investor interests. Consumers are sensitive to any rate increases after four years of higher-than-average inflation, but utility rate bases continue to increase just from infrastructure replacement and energy transition investments alone. Adding new data center generation to the mix could put strain on the regulatory compact.
Mitch Jennings, Energy Analyst
The global oil balance faced several headwinds in 2024, including slower-than-normal demand growth, OPEC+ members overproducing their quotas, and rising geopolitical risk. Despite market data suggesting the market was heading toward oversupply under OPEC guidance for much of the year, the market’s perpetual optimism for stronger demand growth introduced volatility into benchmark oil prices, with daily settlements for the year reporting an over $21/bbl spread.
The 2025 oil market is expected to remain equally volatile. BTU Analytics, a FactSet company, currently expects OPEC+ market management along with a return to normal demand growth to be supportive of oil prices and U.S. drilling for 2025. However, uncertainty around China’s economy and policy shifts under the incoming Trump administration do introduce a healthy amount of risk to both supply and demand. The key points of focus for 2025 will be how these two risks play out and OPEC’s willingness to manage around them. (Read our full outlook.)