What to Expect from Stocks in 2025

 

What to Expect from Stocks in 2025

By John Towfighi, CNN Published: January 1, 2025

Overview of Stock Market Performance

A Stellar Two Years:
The US stock market saw exceptional growth in 2023 and 2024. But what about 2025? Wall Street forecasts suggest continued growth, albeit at a slower pace compared to previous years.

Key Prediction:
Analysts project the S&P 500 will grow by 14.8% in 2025, according to FactSet.

Reasons for Optimism

Key Drivers of Growth:

  • Strong Economic Conditions: The US economy is expected to remain robust.

  • Cooling Inflation: Inflation trends are stabilizing.

  • Federal Reserve Policy: A series of rate cuts in 2024 has set the stage for growth.

  • Tech and AI Stocks: These sectors, led by companies like Nvidia and Microsoft, are expected to dominate once again.

Top Picks for 2025:

  • Nvidia

  • Microsoft

  • Palantir

Dan Ives, a senior analyst at Wedbush Securities, predicts tech stocks could rise by 25% due to less regulation and favorable market conditions.

Potential Challenges

Key Risks to Watch:

  • Uncertain Tariff Policies: Proposed trade tariffs under the new administration could impact markets.

  • Inflation Concerns: The Federal Reserve’s inflation target for 2025 has increased from 2.1% to 2.5%.

  • Geopolitical Tensions: Global events may create market volatility.

  • Fed Policy Shifts: Traders predict only a slim chance of further rate cuts in early 2025.

Notable Commentary:

  • Sam Stovall of CFRA Research highlights investor uncertainty around Fed actions.

  • Mark Zandi from Moody’s Analytics warns of a potential economic slowdown if market momentum falters.

Market Predictions

Mixed Expectations:

  • Moderate Growth: Forecasts for the S&P 500 range from 10% to 14% growth.

  • Bullish Case: Wells Fargo’s Christopher Harvey predicts a 19% gain for the S&P 500, reaching 7,007 by the end of 2025.

Sustainability of Gains:

  • Analysts believe strong corporate earnings and a tech-driven rally could fuel another successful year.

  • However, caution is advised due to high valuations and a maturing bull market.

Final Thoughts

The US stock market’s performance in 2025 will depend on balancing optimism about economic growth with potential risks from policy changes and inflation. Investors should stay informed and prepare for a year of moderate yet healthy gains.

Source: CNN, FactSet, Wedbush Securities, and CFRA Research.

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