Alternate Scenario - Neutral Growth, Overpriced Stocks (30% Odds)

In a neutral scenario, growth occurs at a more reasonable (or should we say realistic?) rate. This scenario pits investors against an uncomfortable truth: that stocks are currently priced for perfection and may suffer flat-to-lower performance for the next 12 months. There’s nothing that goes “wrong” in particular - valuations are simply too high and won’t be entirely justified. There is no recession in the following 12 months, as the Fed lowers interest rates fast enough to support ongoing growth.

2025 S&P 500 Earnings per Share: $260

Valuation Multiple: 21

SPY Median Price Target: $546 (Q3 2025)

Price Range (+/- 1 STD): $616 - $482

CAGR: 10%

ODDS: 30%

Note: the assumptions for this scenario are in-line with the 12-year historical median values for the P/E multiple (21). The $260 EPS projection also assumes downward revisions, which are common with Wall Street analysts. This scenario feels slightly pessimistic as far as the implied Year - End 2024 fair value target goes ($521) but there are two institutions in agreement with these assumptions: Morgan Stanely and UBS.