Stock Market Rally Set to Continue: Experts Weigh In
The stock market is poised for further growth, according to leading financial experts. A recent research note from Bank of America’s equity and quantitative strategy team, led by Savita Subramanian, projects a year-end target of 6,666 for the S&P 500 in 2025, representing a 10.5% gain from current levels.
Strong Economic Growth Expected
The team’s optimism stems from an expectation of robust economic growth. Bank of America’s economics team forecasts the US economy to grow at an annualized rate of 2.4% in 2025, surpassing Bloomberg consensus forecasts of 2% growth. This growth will likely benefit certain sectors more than others.
GDP-Sensitive Companies to Thrive
The firm recommends overweighting Financials, Consumer Discretionary, Materials, Real Estate, and Utilities sectors, which are closely tied to GDP growth. These sectors are expected to outperform the broader market.
Value Stocks Set to Shine
Subramanian’s team also highlights the potential of large-cap Value stocks, which boast healthy cash return prospects and strong connections to the US economy. These stocks are poised to outperform the index, offering investors more opportunities for growth.
Broadening Out of the Rally
The team expects the stock market rally to expand beyond the dominant “Magnificent Seven” tech stocks, which have driven much of the market’s growth in recent years. Instead, they predict the S&P 500 equal weight index will outperform in 2025, as smaller stocks begin to catch up.
A Shift Away from Mega-Cap Tech
The euphoria surrounding mega-cap Tech stocks is nearing all-time highs, despite decelerating earnings expectations. Meanwhile, the average company’s earnings are set to accelerate, making a shift towards Value stocks a more attractive option.
Industry Experts Weigh In
Other industry experts, such as RBC Capital Markets’ Lori Calvasina, share similar views, projecting the S&P 500 to reach 6,600 by the end of next year. Goldman Sachs also predicts the S&P 500 will hit 6,500 in 2025, driven by a narrowing of Big Tech’s outperformance.
GDP Growth Key to Value Outperformance
For Value stocks to outperform, GDP growth needs to exceed consensus expectations of 2%. Calvasina predicts GDP growth will fall within a range of 2.1%-3% in 2025, supporting the case for Value stocks.
A Close Call
While the shift towards Value stocks is expected, it’s a close call, and the broadening of market leadership will be crucial in driving growth. As the market continues to evolve, investors will need to adapt and adjust their strategies to capitalize on emerging opportunities.
Leave a Reply