Oppenheimer has raised its year-end prediction for the S&P 500 to 7,100, up from the earlier target of 5,950 set in April. The firm keeps its 2025 earnings forecast at $275 per share, leading to a forward price-to-earnings ratio of 25.8.

Reduced Market Uncertainty

The updated forecast comes from less market uncertainty due to new trade agreements with Japan and the European Union. A strong earnings season also plays a role, with 84% of companies beating expectations this quarter. Other positive influences include the ongoing strength of the U.S. economy and the Federal Reserve’s success in lowering inflation from 9% to 2.7% without triggering a recession. Oppenheimer is a U.S.-based independent investment bank and financial services firm. With such an optimistic forecast, we think traders should prepare for continued growth in the S&P 500. This means focusing on bullish strategies in the upcoming weeks to take advantage of the expected rally. One suggested strategy is to buy call options on the SPX or its related ETFs. These options provide leveraged exposure to the anticipated rise towards the new 7,100 target while managing risk.

Current Market Climate

The CBOE Volatility Index (VIX) is trading around 13, significantly lower than its historical average of about 20. This low option cost makes it easier to enter new long positions since premiums aren’t inflated by market fear. Bullish sentiment is backed by recent economic data, which shows a strong labor market and steady unemployment at 3.8%. These figures support the notion of economic strength without an immediate recession. However, that implied forward price-to-earnings ratio of 25.8 is higher than usual, similar to levels seen during the dot-com boom in the late 1990s. Therefore, traders might also consider selling out-of-the-money put options. This strategy generates income while showing confidence that a major decline isn’t likely. Historically, markets perform well when the Federal Reserve effectively manages a soft landing, as seems to be the case now. After the rate-hike cycle of 1994-1995, the index saw significant gains, which may serve as a model for our current situation. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now