Market Expert Predicts Modest Gains for S&P 500 in 2025, Sees Potential in Small-Caps
Renowned market expert Jeremy Siegel has released his predictions for the 2025 stock market, suggesting that the S&P 500’s gains may be limited to 10% next year. Siegel anticipates that large-cap tech shares could see flat returns, while undervalued small- and mid-cap stocks are expected to rally.
The S&P 500 has experienced a remarkable surge of 26.5% this year, largely driven by the artificial intelligence boom that has propelled a select group of tech companies. This AI frenzy has significantly influenced the index’s gains, with the so-called “Magnificent 7” stocks, including Amazon, Nvidia, and Meta, playing a crucial role.
However, Siegel notes that these tech giants are beginning to show signs of fatigue, potentially impacting the S&P 500’s performance in the coming year. “We may see relative softness in these stocks next year,” Siegel commented.
This sentiment is echoed by Bank of America, which suggests that the tech trade could be approaching a cyclical peak. The bank also warns that future bond yields and rising rates may cap risk assets in 2025.
The recent election of Donald Trump has contributed to market gains, with traders anticipating market-friendly policies that could boost small-cap stocks. Since the election, the small-cap Russell 2000 index has gained 7%, reflecting this optimism.
Siegel believes that undervalued small- and mid-cap stocks may perform particularly well in the coming year. However, some market observers remain skeptical about small-caps’ ability to sustain a rally, with Capital Economics pointing to their past underperformance following the 2016 election surge.
As investors look ahead to 2025, Siegel’s predictions offer a cautious yet optimistic outlook, highlighting potential opportunities in smaller companies while tempering expectations for continued large-cap tech dominance.
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