U.S. stocks rose in 2024, fueled by the unprecedented surge of artificial intelligence — a revolutionary technology that has driven investor sentiment. Inflation also eased after a couple of years of persistent price pressure, allowing the Federal Reserve to start cutting interest rates.
The results of the presidential election provided an additional boost, propelling the Dow and other major stock indexes to record highs and setting the stage for 2025. As President-elect Donald Trump prepares to return to the White House, certain sectors and stocks are expected to see significant shifts.
Here’s what analysts and experts expect.
An S&P 500 rally that continues
The S&P 500 was hovering above 6,000 in mid-December. Major banks including Morgan Stanley and Goldman Sachs have forecast that the benchmark indexwill reach 6,500 in 2025. The optimism is supported by confidence in ongoing earnings growth and a favorable monetary policy environment, key drivers of market performance.
Eric Schiffer , chairman of the Los Angeles-based investment firm The Patriarch Organization, told Quartz in an email that he expects the S&P to reach 6,750 by the end of next year, with the Dow at 49,500 and Nasdaq at 22,100. (The Dow was at about 44,000 in mid-December, and the Nasdaq at about 20,000.)
Jeff Krumpelman of Mariner Wealth Advisors has a similar forecast, expecting the S&P 500 to reach 6,600 by the end of 2025. In a more optimistic scenario, he anticipates the index could climb as high as 7,000.
Deregulation and tax cuts as fuel for the markets
Paula Murphy , a senior vice president and director of portfolio management at the bank Rockland Trust, said financial firms stand to gain the most from the reduced regulation, corporate tax cuts, and lower capital requirements expected under Trump. That could drive an acceleration of loan growth and an increase in mergers and acquisitions activity for banks .
Murphy said energy companies may also see new gains under the new administration. “Energy companies may also benefit from potential deregulation, as well as policy shifts to further boost domestic oil and natural gas production,” Murphy said in an email. She noted that potential sanctions on oil-exporting countries could tighten global supply, leading to higher prices.
Inflationary pressures
As China continues to be the world’s leading exporter of goods and the United States its largest importer — bringing in approximately $427 billion worth of Chinese goods in 2023 — these dynamics may have significant implications, Murphy said.
“Inflationary pressures stemming from tougher trade with China may lead to volatility in sectors dependent on global supply chains,” she said.
And restrictive immigration policies under Trump may reduce U.S. labor supply, Murphy said, resulting in higher wages. Those increased labor costs could shrink profit margins, especially in labor-intensive sectors such as agriculture, hospitality, and manufacturing.
The AI stock boom continues
AI stocks have been some of the strongest in the market this year, with companies including AI chip maker Nvidia ( NVDA ) driving indexes to new heights. Next year is expected to usher in another phase of AI development, which could lead to greater efficiency and cost savings for businesses.
Murphy said there will also be “increased awareness and scrutiny of the importance of developing and deploying AI in a way that is ethical, secure, transparent, reliable, and respectful of intellectual property rights.”
Challenges for renewable energy
Trump’s election win drove down renewable energy stocks , largely due to his hostile stance on climate policy. Murphy acknowledged that Trump’s victory could transform U.S. energy policy by prioritizing fossil fuels and opposing climate initiatives. But she said this doesn’t mean the renewable energy sector will stop growing.
“Data center and AI rollout has increased demand for renewables by a significant amount this year, and we expect this to continue,” she said. “These data centers require massive power expenditures, and the companies building out these data centers frequently have self-imposed clean energy mandates.”
It also remains to be seen how Trump’s close relationship with billionaire Tesla ( TSLA ) CEO Elon Musk will influence U.S. policy toward electric vehicles.
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