Now that 2024 is coming to an end, it’s easy for investors to sit back and look at the past 12 months and the gains they made. However, getting too comfortable with the stock market usually loses track of the game when investors need to be most focused. It’s important to start 2025 off on the right foot, as a profitable first quarter can give investors the confidence they need to take another look.
For this reason, investors need to be aware of the key themes that may dominate the entire market during 2025 to align their portfolios in the right direction. These themes include fundamental and technical trends, all leading investors into three market sectors that can deliver outsized returns.
Starting with the value stock, it is where the relationship between iShares S&P 500 Value ETF NYSEARCA: IVE And iShares S&P 500 Growth ETF NYSEARCA: IVW comes into play, which may soon call for a rally in value stocks. Then, as the economy returns to interest rate cuts, Energy field Will be one to keep an eye on through Energy Select Sector SPDR Fund NYSEARCA: XLE. Finally, when all these themes play out, foreigners like Chinese stocks Alibaba Group NYSE: BABA And iShares MSCI China ETF Nasdaq: MCHI.
Value stocks will take over in 2025
iShares S&P 500 Value ETF Today
(as of 12/31/2024 05:17 PM ET)
- 52-week range
- $170.13
▼
$206.63
- Dividend yield
- 1.60%
- Property under management
- $36.69 billion
When investors look at the spread between value and growth stocks over the past five years, it becomes clear that value stocks are at a cyclical low relative to growth stocks, and this is usually related to the business cycle. As the cycle resets itself, consider how the Federal Reserve (Fed) has restarted its interest rate-cutting cycle.
However, interest rate cuts are usually implemented when the economy is not doing well, and the Fed’s entry creates a level of uncertainty that can lead to market volatility. This volatility will drive capital to safer stocks, such as the biggest brands in their industries.
This article includes A list of value stocksSuch as including discounted price plays PepsiCo Inc. NASDAQ: PEP, Nike Inc. NYSE: NKEAnd also ASML Holdings NASDAQ: ASML. Aligning the portfolio with this vision could make it worth their time in the coming months of 2025.
If investing in individual stocks seems daunting to some, tracking a broad value ETF can be a great way to find alpha in the stock market for the coming quarters.
A buffet view is always a good view
Energy Select Sector SPDR Fund Today
(as of 12/31/2024 05:45 PM ET)
- 52-week range
- $78.98
▼
$98.97
- Dividend yield
- 3.76%
- Property under management
- $33.29 billion
There is a reason why Warren Buffett decided to buy up to 29% Occidental Petroleum Company NYSE: Oxy Year round: He knows the sector’s risk-to-reward ratios are among the best. As the economy recovers from these new interest rate cuts, many industries will create more oil demand to help unload these stocks again.
The relationship described between growth and value stocks has always been a reflection of oil prices. As prices moderate growth, lower oil prices accommodate an easier and more flexible business environment.
The opposite is true: As value starts to outperform, it’s usually due to higher oil prices that make large-cap stocks with economies of scale more attractive, as they have international operations and exposure. can diversify costs more easily by This is why Wall Street analysts see high volatility in stocks such as Transocean Ltd. NYSE: RIGBeing at the top of the oil price chain commands a consensus $6.25 price targetor 77% above today’s stock price.
If investors haven’t realized it yet, there’s a common theme that energy stocks and value stocks may outperform in 2025, and that’s a lower dollar index. A lower dollar will also help an entirely different set of stocks around the world this time around in 2025.
It’s time for Chinese stocks
iShares MSCI China ETF today
(as of 12/31/2024 05:50 PM ET)
- 52-week range
- $35.58
▼
$59.78
- Dividend yield
- 2.30%
- Property under management
- $5.58 billion
A lower dollar will push up the price of any stock or commodity quoted in dollars, causing the bullish themes behind value and oil stocks to directly favor Chinese stocks. A lower dollar has historically been a catalyst for stocks like Alibaba and the broader China ETF.
This time, however, other major players in the Chinese economy may also take off, viz Neo Inc. NYSE: NIO And PDD Holdings Inc. NASDAQ: PDDwhich may fall into the price range for China’s stock market.
Knowing this, it should come as no surprise to see analysts at Barclays reiterate an overweight rating for Alibaba stock through November 2024. $130 a share price target To call for an upside of up to 52% where the stock trades today.
Before you consider the iShares MSCI China ETF, you may want to hear this.
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While iShares MSCI China ETF currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.
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