NEW YORK — Wall Street anticipates a significant increase in corporate earnings for 2024, with even more substantial growth predicted for 2025.

Businesses are grappling with various uncertainties in the upcoming year, such as changes in economic policies, rekindled inflation, and variations in the job market, alongside consumer spending behaviors.

According to FactSet, profits for companies in the S&P 500 are projected to rise by approximately 9.4% in 2024. This growth is expected to be unveiled as companies begin releasing their final quarterly financial results in the upcoming weeks, representing a noteworthy rise from the 1.4% growth seen in 2023.

The upward trend in profits has mirrored the recovery of the economy, bolstered by a resilient labor market that supports consumer expenditure. Despite ongoing high prices for many goods and services, inflation rates have considerably decreased, allowing businesses to better manage their expenses and providing some relief to consumers.

Wall Street’s expectation for over 12% profit growth in 2025 hinges on the continued stability of these favorable conditions. With earnings being a crucial indicator of the broader market’s performance, they will be closely monitored.

Ross Mayfield, an investment strategist at Baird Private Wealth Management, noted that given the market’s elevated valuations compared to historical standards, it would be reasonable to expect earnings growth to play an increasingly vital role in market performance in the coming years. This makes companies’ abilities to meet profitability targets even more essential as 2025 approaches.

Interest rate decisions by the Federal Reserve are another critical consideration for both businesses and consumers seeking relief from high borrowing costs. In 2024, the central bank reduced its benchmark interest rate three times.

However, expectations for additional rate cuts have become more cautious due to persistent inflation concerns. While inflation surged initially, it has remained slightly above the Fed’s target of 2%, with recent months suggesting a potential uptick in rates.

The Fed has expressed a more cautious outlook as inflation remains a concern. Adding to the anxiety on Wall Street are promises from incoming President Donald Trump regarding potential tariffs on all imported goods, which could escalate prices for companies by increasing the costs of raw materials—costs that are typically passed onto consumers. Such actions could provoke retaliatory tariffs from other countries, further squeezing prices.

Anticipation surrounds the incoming administration’s likely lenient regulatory stance, which could lower costs for businesses and possibly facilitate more mergers and acquisitions due to decreased antitrust scrutiny. Conversely, stricter immigration policies could disrupt the labor market by leading to labor shortages and higher labor costs, exacerbating inflation.

Sung Won Sohn, president of SS Economics, emphasized that the impact of tariffs, immigration policies, deregulation, and tax reforms on inflation and overall economic performance can vary widely based on the timing and implementation of these policies.