US Stocks Poised for Continued Dominance in 2025
As the new year approaches, investment strategists at BlackRock’s Investment Institute are confident that US stocks will maintain their lead in the equity market. According to Wei Li, chief investment strategist, the platform is favoring the US corporate strength scenario, which is driven by stronger earnings growth and broadening outside of the top-performing “Magnificent Seven” names.
Earnings Growth Takes Center Stage
Li emphasized that earnings are a critical factor in long-term equity returns, and the strongest revisions for next year have come from the US and Japan, where BlackRock is also overweight equities. This optimism is shared by other Wall Street firms, including Bank of America and JPMorgan Asset Management, which have also issued bullish outlooks for 2025.
AI Revolution to Boost US Economy
JPMorgan Asset Management believes that the US’s role in the rise of AI will help its economy outpace others globally, leading to continued dominance in the equity market. David Kelly, chief global strategist, expects extraordinary earnings growth to settle at elevated levels for mega-cap tech and reaccelerate in other areas of the market.
Sector Insights: Utilities Set to Benefit
On a sector level, BlackRock notes that Utilities (XLU) are poised to benefit from the broadening of the AI trade due to increased power demands to operate AI servers. This is just one example of the many opportunities arising from the AI revolution.
A Pro-Risk Environment Ahead
BlackRock is overweight US equities headed into 2025, betting on a “pro-risk” environment. Jean Boivin, head of BlackRock’s Investment Institute, cautions that while the outlook is constructive, it’s essential to be mindful of excessive risk-taking down the road.
Wall Street’s Bullish Outlook
Strategists across Wall Street have issued 2025 year-end S&P 500 targets ranging from 6,400 to 7,007, representing potential upside of 5% to 15% over the next year. The consensus is that another strong year of growth in both the US economy and corporate earnings, combined with a pro-business administration and Federal Reserve interest rate cuts, will propel stocks higher.
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