As signs of economic cooling emerge, strategists remain optimistic about stock market growth, with some seeing new opportunities ahead.

Despite signs of a slowdown in the U.S. economy, Wall Street strategists are growing more bullish on the stock market. Some of the most well-known voices in the industry have shifted their focus to growth stocks, even as economic data shows hints of a cooling labor market and slowing growth. 

According to a leading financial analyst at Rineplex, the upcoming months could see the stock market reach new heights, with S&P 500 targets climbing to as high as 6,500 by year-end.

The Optimism Around Wall Street’s Stocks

Wall Street’s confidence in stocks is building, even as economic indicators flash some warning signs. In recent weeks, strategists have stuck by their positive outlooks for the S&P 500, maintaining year-end targets in the 6,300 to 6,500 range. Even with signs of economic softness, strategists believe that a lot of the bad news is already priced into the market.

One key argument made by Morgan Stanley’s chief investment officer, Mike Wilson, is that the stock market often moves ahead of hard data, like job numbers or inflation readings. 

In fact, stock prices for S&P 500 companies were down nearly 30% earlier this year, which could mean that the market has already accounted for potential slowdowns. This insight positions many strategists to believe that the current economic cooling may not have as much of an impact as initially feared.

Soft Economic Data: What It Means for Investors

In the past month, economic reports have pointed to a slowdown in growth. May’s ADP data revealed that the private sector only added 37,000 jobs, its smallest increase in more than two years. 

Similarly, jobless claims have surged to their highest level since October 2024. Even more troubling, the nonfarm payroll revisions indicated that 95,000 fewer jobs were added in March and April than initially reported.

However, strategists at Goldman Sachs argue that this kind of soft economic data often reaches its low point before hard economic data. Chief U.S. equity strategist David Kostin explained that economic surveys and expectations tend to reflect a peak or bottom in the cycle well ahead of official metrics like inflation or job growth. 

For instance, the Conference Board’s future expectations index posted its biggest monthly jump since May 2009, suggesting that investors may be turning more optimistic, even as hard data continues to lag.

Rising Stock Market Targets Amid Lower Tariff Fears

One of the most significant shifts in the market outlook comes from Citi’s equity strategy team, which recently raised its S&P 500 target to 6,300 from 5,800. A strategist attributed this change to the pause in tariff escalation between the U.S. and China, which has alleviated some of the uncertainty that has plagued the market over the past few years.

Tariff-driven inflation has been one of the biggest concerns for investors, but with the easing of these tensions, growth stocks, particularly those in the tech sector, are receiving renewed attention. Chronert and other strategists are now more confident in the 1.4% projected economic growth for 2025, a modest increase from recent lows.

Growth Stocks Lead the Charge: Why Tech Remains the Darling of Wall Street

While overall growth expectations may not be sky-high, certain sectors are still set to outperform. For one, the big tech stocks, such as those in the S&P 500’s tech sector, are expected to continue their dominance. Despite high valuations, tech companies have maintained their growth trajectory, even in a higher interest rate environment.

Companies like Apple, Microsoft, and Nvidia are still expected to deliver solid returns, buoyed by strong fundamentals and continued demand for their products and services. Big Tech remains the cornerstone of many investment portfolios, offering the promise of long-term growth and resilience, even as broader economic data shows signs of slowing.

Key Risks and What Investors Should Watch

While the outlook for the stock market is largely positive, there are still risks to consider. As with any economic cycle, unexpected shifts in economic growth data could pose a risk to the market’s bullish momentum. If economic slowdowns are steeper than anticipated, growth stocks, especially those with higher valuations, could see some downside pressure.

The most crucial data points to watch over the coming months will be the inflation rate, job numbers, and consumer sentiment. As these factors continue to evolve, they will give investors a clearer picture of whether the economic slowdown is just a temporary bump or a more significant setback for the economy.

Looking Ahead: Stocks in the Long-Term Picture

Wall Street strategists remain optimistic about the stock market, as tariff concerns ease and growth stocks gain traction. Despite softening economic data, the market has priced in worst-case scenarios, positioning it for potential growth by year-end. 

The key takeaway for investors is that stock market recovery may not be as dependent on traditional economic indicators. The S&P 500 is responding to softer data, and if this trend continues, expect strong rallies in tech stocks and growth sectors. Watch inflation and unemployment claims, but overall, the second half of the year looks promising for long-term investors.