Investing.com – Investors should expect some moderation in growth in 2025, following two years of more than 20% expansion in the benchmark, according to BTIG analysts led by Jonathan Krinsky.
Despite a somewhat dour end to 2024, all major US indices posted double-digit annual gains, with the S&P 500 in particular notching its best two-year performance since 1997-1998.
Much of the optimism was bolstered by the Federal Reserve's decision to begin cutting interest rates from multi-year highs.
Authorities have optimistically pointed to a decline in inflation pressures from a peak in 2022, although some have noted that this easing has cooled in recent months. Federal Reserve Chair Jerome Powell said at a news conference last month that while policy is in a “good place,” the central bank will now take a more “cautious” approach to further reductions.
The administration of incoming President Donald Trump, plus a series of victories by other Republican candidates in the crucial November elections, have also raised hopes that businesses will benefit from a new era of looser regulations and tax cuts. Still, uncertainty continues to cloud Trump's plans to implement both strict tariffs and widespread deportations, and whether these measures can reignite inflation.
Elsewhere, a surge in interest around artificial intelligence has caused a jump in several stocks exposed to the nascent technology. Nvidia (NASDAQ emerged as the biggest global gainer in terms of market capitalization in 2024, thanks in large part to growing demand for its ai-focused chips across a variety of industries. The company added more than $2 trillion in value market in 2024, closing the year at $3.28 trillion, which places it as the second highest valuation among publicly traded companies in the world.
BTIG's Krinsky noted that while stock markets in the first half of 2024 were primarily driven by the rise of mega-cap names like Nvidia, many investors expected the breadth of these gains to widen once the Federal Reserve will begin to cut rates.
However, Krinsky noted that that breadth, measured by the percentage of stocks in the Russell 3000 index trading above the 200-day moving average, peaked in mid-July. As of December 30, less than 60% of S&P 500 constituents were above their 200-day moving average, the weakest level since 2023.
“As always, a breadth breakout is either a warning sign or an opportunity. We saw a similar setup at the end of (20)21, and that clearly predicted underlying issues ahead of the (20)22 bear market,” Krinsky said. .
“In contrast, similar setups at (19)96, (20)04, (20)14 and (20)18 were all opportunities before strong rallies. Our base case at this point is that the recent divergence is predicting some A Early in the new year, the elastic band between mega-cap growth and the rest of the market has been stretched too far, and some reversal is likely, with winners catching up to losers as part of some rebalancing. and the tax sale takes hold.”
He added that “after an initial restructuring,” there may be “some upside in cyclical/value trading,” as long as macroeconomic data “continues to hold up.”
“While that could mean a less dovish Fed, ultimately strong data should be bullish for stocks over time,” Krinsky said.
With this vision in mind, here are some of the best BTIG picks for the first half of 2025.
Bloom Energy Corp. (NYSE:): “The stock had been in a steady downtrend for nearly four years from early 21 to late 2024. The gap higher in November appears to be a game-changer, with strong bullish follow-through.”
Expedia Inc. (NASDAQ:): “A great base for 2022-2024, but the stock broke out in November and has been consolidating for the past two months. If it can break above $192, it should test its previous all-time highs from early 2022 in the range.” $210-$220.”
Balloon Doctor (NYSE:): “After a multi-year bear market from 2021 to 2023, the stock stabilized and reversed that bearish trend, finally surpassing its 2021 peak in December. While further consolidation could be warranted, there is strong support in the 75-80 range.”
Health equity (NASDAQ:): “After a multi-month consolidation in the first half of (20)24, the stock broke out of a range in November with a bullish gap. After pulling back to almost fill the gap, it has once again started to go up more.”
About participations (NYSE:): “The stock has been on a very consistent uptrend for the past six months, with price consolidating, then rising, and consolidating again. It has recently been consolidating since mid-November and appears poised for another move higher. “That should take it well above $60.”
Regency centers (NASDAQ:): “Trading in a sideways range for much of 2022-2023, the stock began to break out last summer. After peaking in September, it has essentially diverged over the past few months. This creates a attractive entry point (…)”
block inc. (NYSE:).: “The stock spent most of 2022-2024 in a sideways trading range. In November, it finally broke that multi-year resistance around $90. After nearly trading up to $100, it has consolidated the breakout and is now poised to resume the uptrend.”
Verona Pharma PLC (NASDAQ:): “The stock has been on an extremely strong trend that is only six months old. The stock is up more than 4x since the May lows, but as long as the uptrend remains intact, we will stay with the stock.”
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