Can stocks pull off a third consecutive year of big gains?

Wall Street is grappling with whether another year of robust gains is possible for a stock market that is looking precariously expensive.

- Krystal Hur

The S&P 500 has surged 28% in 2024 and is on pace for back-to-back annual jumps of more than 20% for the first time since a four-year stretch that ended in 1998.

Strategists at some of the nation's biggest banks are projecting more modest returns in 2025.

JPMorgan Chase, Morgan Stanley and Goldman Sachs project that the S&P 500 will reach 6500 by the end of next year, a 6.7% increase from Friday's close of roughly 6090.

Others are a little more bullish. Barclays recently raised its price target to 6600. Bank of America and Deutsche Bank expect the benchmark index to hit 6666 and 7000, respectively.

Analysts generally agree that President-elect Donald Trump's pro-growth policies will be a boon for stocks, but some question how much farther they can run.

A backdrop of high interest rates, geopolitical turmoil and potential trade wars could dent the market's gains, some warn.

Yet many investors are hesitant to call an end to a rally that has repeatedly defied expectations.

"We're kind of in the honeymoon phase of the new administration," said Matt Miskin, co-chief investment strategist for John Hancock Investment Management.

"But the Fed is going to be on the hook for reacceleration of the economy, when it's doing pretty well, frankly, and perhaps a bit firmer inflation."

In the coming days, investors will parse another round of inflation data to see whether price pressures are continuing to ease.