Breakfast News: New Beginnings
January 2, 2025
| S&P 500 5,882 (-0.43%) |
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| Nasdaq 19,311 (-0.9%) |
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| Dow 42,544 (-0.07%) |
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| Bitcoin $93,588 (+1.76%) |
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Source: Image created by JesterAI.
1. Out With the Old
After notching up a second consecutive annual gain greater than 20%, the S&P 500 now boasts a 53% rally over the past two years. This is the strongest two-year stint from the index since the juicy 66% gain from 1997-1998.
- Key factors at play: AI was the big driver behind the market rally, with poster child Nvidia (NVDA -0.02%) surging 171%. The start of the rate cut cycle from the U.S. Federal Reserve was cheered by investors as inflation moved lower.
- Standout alternative assets: Bitcoin (BTC -3.41%) gained 119% during the year, topping $100k for the first time. Gold kept its shine, also hitting all-time highs amid a 27% move higher. The U.S. Dollar rose over 7%, closing the year at the highest level since November 2022.
2. In With the New
Wall Street strategists are forecasting further stock market gains for 2025, albeit at a slower pace. The median year-end target for the S&P 500 is 6,600 points, around a 12% gain from current levels.
- “Factors such as economic growth and trade policy lean in favor of the S&P 493”: David Kostin, Chief U.S. Equity Strategist at Goldman Sachs (GS -0.02%), reckons the market could do well even without massive outperformance with the Magnificent 7. He expects earnings growth to narrow between the two groups, supporting the importance of a diversified portfolio.
- A bear among the bulls: The lowest S&P 500 forecast comes from Stifel (SF 0.37%) with a target of 5,500 points. The brokerage company notes concerns around slower economic growth and sticky inflation, even predicting a complete pause in interest rate cuts.
3. AI Picks and Shovels
Megacap tech stocks may have stolen the limelight in 2024, but there were notable performers outside of this group worth noting.
- Tapping into renewable energy: The rush to use clean energy to help power AI needs saw data center stocks soar, such as the 258% gain from Texas-based Vistra (VST -1.57%). The abundant energy resources in the state positively affected Texas Pacific Land (TPL 1.40%), with the land owner’s stock price doubling in 2024.
- Expansion ramping up: With new partnerships coming online for Vistra and other data center competitors, this second derivative “picks and shovels” area of AI could be a key area of focus for the coming year.
4. Beaten-Down Stocks to Consider in 2025
Fool analysts have highlighted for members nine strong companies that stumbled in 2024 but still maintain their fundamental promise. All current TMF recommendations, they include Nike (NKE -1.11%) and Unity Software (U -0.56%).
- Asit Sharma: “We think Nike's powerful flywheel of innovation, marketing, and profits will again reach the momentum it routinely enjoyed before the company's post-pandemic stumble.”
- Kirsten Guerra: “[New] leadership, paired with possibly the most extensive mobile gaming dataset in the world, offers a long runway for Unity to dramatically improve its monetization business in coming years.”
5. Foolish Fun
With the Magnificent 7 contributing more than half of the S&P 500’s overall gain for 2024, Fool analyst Jason Moser recently asked Epic members for their favorite non-MAG7 companies going into 2025. Discuss with friends and family, or become a member to hear what your fellow Fools are saying!
