The S&P 500 (NYSEARCA: SPY) is in a strong uptrend that is gaining momentum following the 2024 election results. The robust technical outlook suggests that the market can increase by another 20% to reach 7,400. As wild as it sounds, the target is derived from not one but numerous projections that provide signal convergence and increased reliability. The first projection is based on the COVID-19 bubble. The COVID bubble began with a sharp, fear-driven price correction in the S&P that led the market into a buying opportunity and rally that increased its value by more than 100% over the next year. The increase was driven by stimulus spending and monetary policy, which still impact today's economy. 

Economic Health Provides a Bid for Stocks

As much economic slowing as has happened in recent months, the U.S. economy continues to grow and fuel earnings growth for the S&P 500. The most problematic data is the labor market data, but even that isn’t bad. The labor market has cooled significantly but remains healthy relative to the pre-COVID levels and consistent with sustainable economic growth. Regarding the stock market, a healthy labor market provides an underlying bid for stock because of the billions in retirement account savings invested each month. The US labor force is at record levels and growing, so the support it provides is substantial. 

With Trump back in the White House, the labor market will likely improve and accelerate the outlook for GDP growth and S&P 500 earnings. Even so, the outlook for S&P 500 earnings is solid across sectors and supportive for the market, with growth expected to accelerate to double-digits in Q4 and sustain the pace in 2025. 

Big Tech Will Drive S&P 500 Gains in 2025

More factors than technical indications and labor markets drive the stock market in 2024 and the outlook for 2025. The primary is the ongoing supremacy of big tech and AI, which will likely gain momentum in 2025. The six largest S&P 500 companies account for more than 30% of the index value and are forecasted to rise by double-digits next year. The consensus price targets lag many underlying markets, but revision trends are positive for all of the S&P 500 leaders, with the high-end range predicting an average 30% gain. 

The leaders, including NVIDIA (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), and Meta Platforms (NASDAQ: META), are all indicated to gain 35% compared to early November price points, and the forecasts will likely rise over the coming year. These companies have proven that investment in data centers, the cloud, and AI pays off and are increasing their investments quarterly. Add in the tailwinds of falling interest rates and a business-friendly President, and the odds are high that the rally will extend well beyond the end of 2025 because of persistent outperformance relative to forecasts. 

Capital Return Growth Underpins the Stock Market Advance

Capital returns and capital return growth underpin the stock market advance. The S&P 500 grew its capital return, including dividends and share buybacks, at a mid-single-digit pace in 2024 and is expected to sustain the growth in 2025. Goldman Sachs (NYSE: GS) predicts that total capital return will top $1 trillion and continue to grow from there. The forecasts are likely cautious, given the economic shifts that are underway. With headwinds easing and tailwinds beginning to form, the S&P 500 will likely accelerate its capital return growth by the end of 2025. 

The critical technical detail for today’s investors is that the COVID-19 bubble, from bottom to the 2021 peak near 4,800, is worth 2,600 S&P 500 points. That’s the first projection, made from the 2021 peak, and it puts the market at 7,400 now that the original trading range is broken. The second project is based on the post-COVID-19 stock market correction. The market fell nearly 30% to establish support and the bottom of a significant trading range at 5,500. The range is worth 1,300 S&P 500 points, 50% of the original bubble, and provides the second projectionable figure. The market is on the brink of completing a 1,300-point advance from the 2024 breakout point and will likely advance by that much again once the critical target at 6,100 is broken. Another 1,300 advance puts the market at 7,400, aligning with the macro-target.