Investing.com – Investors should expect some growth to slow in 2025 after two years of more than 20% expansion in the benchmark index, according to BTIG analysts led by Jonathan Krinski.
Despite a somewhat bleak end to 2024, all major US indexes posted double-digit annual gains, with the S&P 500 in particular posting its best two-year performance since 1997-1998.
Much of the optimism was fueled by the Federal Reserve’s decision to begin cutting interest rates from multi-year highs.
Policymakers pointed optimistically to the easing of inflationary pressures since the peak in 2022, although some said that easing had moderated in recent months. Fed Chairman Jerome Powell said at a press conference last month that while policy is in a “good place,” the central bank will now take a “more cautious” approach to further tapering.
President-elect Donald Trump’s administration, plus a string of victories by other Republican candidates in key November elections, have also fueled hopes that businesses will benefit from a new era of looser regulations and tax cuts. Still, uncertainty remains clouding Trump’s plans to impose both tough tariffs and sweeping deportations — and whether these moves could reignite inflation.
On the other hand, a wave of interest in artificial intelligence caused a jump in several stocks that were exposed to the new technology. Nvidia (NASDAQ: ) has emerged as the biggest global gainer in terms of market capitalization in 2024, thanks in large part to increasing demand for AI-focused chips across a range of industries. The company added more than $2 trillion in market value in 2024, ending the year at $3.28 trillion, giving it the second-highest valuation among publicly traded companies worldwide.
BTIG’s Krinsky noted that while equity markets in the first half of 2024 were driven mostly by gains in megacap names like Nvidia, many investors expected the breadth of those gains to widen once the Fed starts cutting rates.
However, Krinsky noted that the spread, as measured by the percentage of Russell 3000 stocks trading above its 200-day moving average, peaked in mid-July. As of Dec. 30, less than 60% of S&P 500 components were above their 200-day moving average — the weakest level since 2023.
“As always, a drop in width is either a warning sign or an opportunity. We’ve seen a similar setup recently [20]21, and this clearly predicted the fundamental problems ahead [20]22 bear market,” Krinsky said.
“On the contrary, similar arrangements in [19]96, [20]04, [20]14, i [20]18 were all opportunities before strong rallies. Our base case at this point is that the recent divergence foreshadows some trouble early in the new year. The rubber band between megacap growth and the rest of the market has been stretched too far and the winners are likely to catch up to the losers as some rebalancing and tax selling takes hold.”
He added that “after the initial shakeout” there could be “some uptick in cyclical/value trade,” as long as macroeconomic data “continues to hold.”
“While this could mean the Fed will be less hawkish, ultimately the strong data should be positive for stocks over time,” Krinsky said.
With that in mind, here are some of BTIG’s top picks for the first half of 2025.
Bloom Energy Corp (NYSE: ): “The stock has been in a steady downtrend for nearly four years from the start of ’21 to the end [20]24. The larger gap in November appears to be a game changer, with a strong increase.”
Expedia Inch (NASDAQ: ): “Big base from 2022 to 2024, but shares broke out in November and have consolidated over the past two months. If it manages to reach $192, it should test its previous all-time highs from early 2022 range of $210 to $220.”
Globus Medical (NYSE: ): “After a multi-year bear market from 2021 to 2023, stocks stabilized and reversed that downtrend, finally surpassing their 2021 peak in December. While some further consolidation may be warranted, there is strong support in 75-80 range.”
Health equality (NASDAQ:): “After several months of consolidation in the first half of the year [20]24, the stock broke out of the range in November with an upward gap. After pulling back and almost filling the gap, he started to move higher again.”
Under construction (NYSE: ): “The stock has had a very steady uptrend over the past six months, with price consolidating, then rising and consolidating again. It has recently consolidated since mid-November and appears poised for another upward move that should be a long way off under $60.”
Regency Centers (NASDAQ: ): “With a sideways trading range for much of 2022-2023, the stock began to break out last summer. After peaking in September, it has essentially gone sideways over the past few months. This creates an attractive entry point […]”
Block Inc (NYSE:).: “The stock spent most of 2022-2024 in a sideways trading range. It finally broke through that multi-year resistance around $90 in November. After nearly trading up to $100, it consolidated the breakout and is now ready to continue growing.”
Verona Pharma PLC (NASDAQ: ): “The stock has had an extremely strong uptrend that is only six months old. The stock is up more than 4x from the May lows, but as long as the uptrend remains intact, we will hold the stock.”
