Business Forum • 9 December, 2024 at 10:17 AM
As 2024 comes to an end, investors are evaluating the stock market's trajectory and planning their priorities for the year ahead. In response, Freedom24, the innovative trading platform connecting investors to the world's leading stock exchanges, has released its Stock Market Outlook for 2025. This comprehensive report aims to equip Romanian investors with the insights needed to make strategic decisions in an ever-evolving financial landscape, offering a detailed analysis of market-defining trends and highlighting key sectors poised for significant growth in the coming year.
Key stock market trends for 2025
Growth normalisation: The consensus expects the S&P 500 Index to see more modest returns in 2025 after two consecutive years of significant growth (over 20% in 2023 and 2024). Forecasts for the index range from approximately 6500 to 7000 by year-end, reflecting potential upside of about 11% to 17% from current levels.
Interest Rate Impact: The ongoing cycle of interest rate cuts by the Federal Reserve is expected to create a favourable environment for stocks by lowering borrowing costs and boosting corporate earnings. This easing of monetary policy is seen as a catalyst for further market gains.
Revival of fixed income investments: With interest rates expected to stabilize in 2025, bonds are gaining investor appeal, particularly investment-grade and short-term high-yield bonds, offering higher yields than in the past decade. This shift highlights a growing focus on portfolio protection amid global economic uncertainty.
Diversification beyond U.S. dominance: With parts of the US stock market appearing overvalued, investors are shifting focus to Europe, Asia, and emerging markets. These regions offer growth potential in sectors like renewable energy, healthcare innovation, and localized manufacturing, providing diversification in less saturated economies.
Investing in sustainable development and clean energy: Governments and corporations are intensifying sustainability efforts, driving significant investment in clean energy technologies like solar, wind, and energy storage, especially in Europe and Asia. This aligns with global decarbonization goals and offers a long-term growth opportunity for investors.
Reshaping global supply chains: Ongoing geopolitical tensions are reshaping global supply chains. Companies are increasingly adopting strategies of "nearshoring" and "friendshoring" - moving production closer to home or to geopolitically aligned regions to reduce risk. This adjustment opens up opportunities in localised production centres and stable markets such as South East Asia, Eastern Europe and parts of Latin America.
Cryptocurrencies and the development of DeFi: Lower regulatory barriers could attract institutional investment, boost blockchain innovation, and encourage adoption of DeFi platforms and cryptocurrencies as alternative assets. The Trump administration's focus on financial sovereignty and technological leadership may position the US as a global blockchain hub. Additionally, rising interest in tokenized assets, cross-border payments, and stablecoins presents opportunities for retail and institutional investors.
„The US market is expected to remain resilient, supported by continued monetary easing by the Federal Reserve, solid corporate earnings and rising government spending under the new administration. Meanwhile, China's recovery and broader growth in emerging markets such as India and Southeast Asia are likely to attract capital flows, especially into technology and consumer sectors. With a projected profit growth rate of around 15%, we are seeing clear alignment with historical trends where strong economic conditions drive substantial corporate profits. This optimism underscores the strength and adaptability of global markets in navigating evolving dynamics,” explains Maxim Manturov, Head of Investment Research at Freedom24.
Sectors expected to perform well in 2025
1. Technology (especially small caps): In 2025, innovative tech companies, especially small and mid-cap players in AI, cloud, and cybersecurity are expected to gain traction. Additionally, strong demand for 5G and edge computing infrastructure keeps the sector attractive to investors.
2. Healthcare: Biotech and pharmaceutical innovations in gene editing, personalized medicine, and chronic disease management lead growth, supported by an aging global population and rising demand in developed economies.
3. The uranium sector: Expanding nuclear projects in China and India, interest in small modular reactors (SMRs) in the West, and the restart of the Three Mile Island plant reflect rising demand in uranium. Geopolitical tensions and fossil fuel uncertainty reinforce uranium's role in energy security and the AI transition.
4. The consumer necessities and discretionary goods sector: Health, wellbeing and e-commerce-focused brands are increasing. Rising middle-class incomes in Asia-Pacific markets are fuelling demand for premium products, while inflation-induced changes in spending are supporting staples such as food and household goods.
5. Financial services: Improving credit conditions due to monetary policy normalization, coupled with increased activity in asset management and insurance, are expected to drive earnings growth. The sector is also benefiting from technological integration such as digital banking and blockchain innovations.
6. The manufacturing sector: Trump's pro-manufacturing policies, which prioritise deregulation and infrastructure investment, tax incentives and relaxed regulations can boost US production and capital spending. Trade policies favouring local supply chains and automation further strengthen the sector, despite the potential risks of trade tensions.