Allspring Global Investments
The breadth of the US equity market should continue to widen beyond the handful of mega-cap growth stocks that have pushed index concentrations to unprecedented levels. It’s also likely that we’ll see many of the value-focused sectors continue to outperform.
Allspring Global Investments
Investments in small- and mid-cap US equities will likely increase. Given their attractive valuations relative to large caps, investors are being compensated to move down in market cap.
Amundi Investment Institute
While excessive valuations persist in US mega caps, we see bright spots appearing in Japan, Europe and the US market beyond the mega caps.
Amundi Investment Institute
A positive backdrop for earnings, coupled with good macro liquidity, is positive for equity. However, valuations are stretched, particularly in US mega caps. Investors should look at equal-weighted indexes in the US, pockets of value in Europe and sectors such as financials, utilities and communication services, and consumer discretionary. Value investing and mid-caps are good hedges against possible declines in Growth and mega-cap stocks.
Amundi Investment Institute
US earnings forecasts and valuations look aggressive, yet past soft landings have driven strong equity gains. We remain optimistic about 2025 and we expect a mid-high single-digit return. The convergence of earnings growth should support a broadening of the rally in favor of US equal-weighted stocks.
Amundi Investment Institute
Sector allocation will be more critical than country allocation, emphazing a shift towards cyclicals, particularly consumer discretionary. AI, defence upgrades and manufacturing re-shoring will continue to be key themes.
Apollo Global Management
In public equities, valuations are too lofty, high concentration remains, and risk premia is virtually nil. When stocks are overvalued like they are today, lower future returns can be expected.
AXA Investment Managers
Policy may stimulate stronger earnings growth in areas such as financials and energy although the impact of potential tariffs is unknown for other industries. Overall, however, US equities are likely to retain their leadership position. Small-cap equities could also benefit from lower taxes and interest rates with upgrades to earnings expectations already having been seen.
AXA Investment Managers
Europe’s growth outlook is subdued, although equities could get some support from lower interest rates and the improvement in real incomes via lower inflation. European stocks benefit from more attractive valuations than in the US, and they boast a higher dividend yield. But expected earnings growth is only about half that forecast for the US.
AXA Investment Managers
Interest rate-sensitive and consumer-focused sectors should continue to perform well, with some potential upside for industrials – provided the global industrial cycle shows signs of an upturn and if the worst fears of a trade war do not materialize.
AXA Investment Managers
A US growth focus in equities is also seen as core with upside coming from thematic sectors like automation, the green transition and the broader continued strong investment in technology and AI.
AXA Investment Managers
China appears likely to continue rolling out policies designed to stimulate domestic demand. This should be positive for Chinese equities, but any improvement needs to be judged against the potential negative growth impact from US tariffs.
AXA Investment Managers
Emerging-market equities may find this a more difficult backdrop with a less benign US interest rate outlook and a stronger dollar also being headwinds.
Bank of America
BofA forecasts the S&P 500 to end 2025 at 6,666, gains of 5-10% for global stocks, rotation from US to International markets in the second quarter.
Barclays Private Bank
With global growth projected to slow below trend in the next couple of years and yields expected to decline, defensive sectors and so-called bond proxies could help to improve portfolio diversification. At the sector level, utilities and consumer staples appear best positioned globally, being negatively correlated with the business cycle and interest rates. They remain reasonably priced, especially in Europe.
Barclays Private Bank
We maintain a favorable view on UK large caps, due to their defensive tilt, undemanding valuations and attractive dividend yield. The FTSE 100 index has low exposure to the technology sector compared to global equity indexes, making it a compelling option to capitalize on a broadening of market leadership.
Barclays Private Bank
At this stage of the cycle, we favor quality companies with strong balance sheets, that have shown resilience in previous downturns and trade at reasonable prices. For investors who need to maintain index-level allocations, we would lean towards equally weighted indexes.
Barclays Private Bank
In this environment, maintaining a well-diversified portfolio across sectors, regions, and styles is essential for equity investors. With returns likely to be more muted going forward, a greater focus on yield generation and capital protection is essential. Option strategies and structured products can be useful tools in that respect.
Barclays Private Bank
Chinese shares may become investible again in the coming months, once clarity on the stimulus measures announced by the authorities in September emerges.
BCA Research
For now, global investors should be underweight stocks versus bonds and long portfolio duration on a six- to 12-month time horizon. Over the nearer-term, positive equity market momentum could continue unless the labor market deteriorates further, the prospect of fiscal thrust wanes, or until tariffs are announced or seem imminent.
BCA Research
Within a global equity portfolio, we recommend an overweight stance toward the US versus global ex-US even though the US market is very richly priced. Two out the three drivers of relative common currency equity returns favor the US next year. Still, valuation shows that the US equity market is quite vulnerable in absolute terms to a significant shock. Global ex-US stocks are priced much more reasonably, but their earnings would be disproportionately impacted by unilateral US tariffs.
BCA Research
We recommend overweighting defensive sectors versus classical cyclicals over the coming year. We recommend favoring large over small caps for now. Small caps are reliably high-beta plays, and major tariff imposition leading to declining large-cap stock prices would very likely entail small-cap underperformance.
BCA Research
Our central case for US fiscal policy is likely to be bullish for growth and US corporate profits. If a moderate expansion in the deficit and deregulation are the only policies likely to be implemented next year (a replay of 2017), we would expect the US economy to continue to expand and equities to rise in 2025. That would warrant an overweight equity stance over a six- to 12-month time horizon.
Bel Air Investment Advisors
Trading at a discount alone is insufficient to close the outperformance gap, unless earnings in the RoW grow faster than the that of US corporations. Based on real-time data, this seems unlikely.
Bel Air Investment Advisors
We believe the new Trump administration policies of looser regulations will lead to increased M&A activities across various sectors in the year ahead. This may significantly boost the prospects of small and mid-cap companies in the US going forward.
Bel Air Investment Advisors
Even at current elevated multiples, we anticipate that US stocks, which represent 64% of global equities, to outperform the RoW in 2025. Furthermore, US companies are much further along in the use of AI and other advanced data science techniques in optimizing their business models.
BlackRock Investment Institute
We don’t think pricey US equity valuations alone will trigger a near-term reassessment. But we are ready to adjust if markets become overexuberant.
BlackRock Investment Institute
Robust economic growth, broad earnings growth and a quality tilt underpin our conviction and overweight in US stocks versus other regions. We see valuations for Big Tech backed by strong earnings, and less lofty valuations for other sectors.
BNP Paribas Asset Management
Our regional equities preference remains the US. Enthusiasm for artificial intelligence was the primary driver of rising earnings in 2024; the bulk of earnings derived from the types of stocks making up the tech-heavy Nasdaq 100 index, while the rest of the market saw barely positive growth. In 2025, the distribution is expected to be more balanced, even if Nasdaq earnings growth is still superior.
BNP Paribas Asset Management
European equities should also see market gains, but once again lag most other major markets. The region remains hindered by the overhang of geopolitics and structural challenges facing its largest economy, Germany.
BNY
Following a year of resilient earnings growth, we see a continuation of this trend with S&P 500 earnings growing between 10-15% in 2025. This brings our year-end S&P 500 target to 6,600. This suggests continued positive, albeit more muted, returns compared to 2024.
BNY
US equities are poised to benefit. Earnings growth will remain strong while AI-driven technology improves profit margins, allowing US equities to continue to outperform the rest of the world.
BNY
In addition to solid corporate and economic fundamentals, the new administration’s focus on business-friendly policies, including the potential reduction of the corporate tax rate and reduced regulation, should support the US equity market’s move higher. History tells us that stocks tend to advance following an initial rate cut as long as a recession is avoided, which is our expectation. In fact, under these circumstances, stocks tend to earn double-digit returns.
Capital Group
Look for opportunities to invest in dividend payers that have been left behind by the market. These include forgotten pharma, or drugmakers that have been ignored amid the market focus on weight loss treatments, as well as utilities and select banks.
Capital Group
The valuation disconnect between small and larger stocks is one of the highest we’ve seen. There are a lot of innovative companies reasonably priced relative to larger companies associated with well-known market themes. Certain small caps are poised for a comeback.
Capital Group
Conditions appear favorable for broader market participation to continue, boosted by incoming President-elect Donald Trump’s business-friendly policy agenda. Priorities include easing regulations for banks, energy and health care companies, as well as increasing defense spending.
Capital Group
The build-out of data centres, a rebound in global travel demand and new energy sources are creating growth opportunities for Europe’s industrial titans. Although, tariff proposals in the US could pose headwinds for European companies so we are monitoring developments closely.
Capital Group
Investors will need to dig deeper to discover opportunities in emerging markets. India and China present distinct investment opportunities and risks, with India’s tech boom and China’s consumer market each driving growth.
Carmignac
The broadly shared pessimistic sentiment towards Europe means some great quality assets – less exposed to economic and political uncertainty — can be bought at discount compared to their American peers, providing a great portfolio diversifier. We are not expecting fireworks in growth given what is happening – or rather not happening – on the old continent, but several factors could play in favor of European equities. There are many global leaders to be found at a very reasonable price.
Charles Schwab
The combination of mildly accelerating UK economic and earnings growth, tame inflation, rate cuts by the Bank of England and Brent crude oil prices remaining in this year’s range of $70 to $90 per barrel, may help to deliver solid stock market performance in 2025, above the 30-year average of 6%.
Charles Schwab
With the ECB widely expected to cut rates steadily through the middle of 2025, easier monetary policy could lift stock market valuation, as took place during prior rate cutting cycles.
Charles Schwab
Japanese stocks remain attractively valued and have tended to perform better when the yen is weakening. Investors who are concerned about currency volatility may want to consider currency hedged investments.
Charles Schwab
China’s economy could pick up in the near term due to recent acceleration in fiscal spending and front-loading of exports but is likely to continue to decelerate in 2025. Chinese stocks may continue to trade on prospects for stimulus, rather than company fundamentals.
Citi
The 2018 episode suggests that equities do not trade well during tariff wars, even if they are not as broad. The market will have to price some risk premium for broader tariffs, in our view. While US equities should outperform, it is a headwind for all markets. We stay overweight equities, with a bias to the US, but are prepared to cut early next year.
Citi
Our bubble indicator is suggesting that the rally is getting long in the tooth. We position for broadening, allocating a part of the US overweight into small caps, which typically does well when the manufacturing ISM is bottoming.
Citi
In sectors we stay overweight tech on the positive cyclical backdrop and overweight financials on potential deregulation. If tariffs are more sweeping or earlier than anticipated, our overweight in communications and underweights in materials and industrials should outperform.
Citi
Investors are particularly downbeat on European equities, and the Stoxx 600 has lagged the S&P 500 on par with major crises. But bearish sentiment might set the stage for upside surprises. Potential catalysts include stabilizing EPS revisions, improving macro data, supportive tariff outcomes, China stimulus or ceasefire in Ukraine. We also go long the UK, a more defensive market, where tariffs are not a major threat and which could outperform early next year.
Columbia Threadneedle
At some stage US stocks will be too expensive, but underperformance is most likely to happen when other areas grow faster. If, for example, Europe grows faster it will look attractive because it is that much cheaper. Do we expect it to do so? No.
Deutsche Bank
Our equity strategists have been consistently and successfully bullish over the last decade, and they remain confident for 2025 with an S&P 500 target of 7,000 with gains seen in Europe too as they believe the risks are priced in.
DWS
Equities should continue to be driven primarily by rising earnings, which we expect on both sides of the Atlantic. However, in the US, this growth is likely to continue to be strongly driven by the large tech stocks, which we expect will therefore retain their dominant position in the stock markets. In order to avoid being fully exposed to the resulting concentration risk we have no regional preferences and we foresee high single-digit returns on average globally for equities by the end of 2025.
DWS
We believe investors should prepare themselves in good time for the fact that equities are more likely to see mid-single-digit total returns in coming years, not least due to the currently high valuation multiples.
Evercore ISI
While tech is expected to lead EPS growth, broad based growth across all sectors will lessen the index’s discomfiting reliance on a handful of stocks.
Evercore ISI
Volatility will rise given the unknown knowns of US policy changes intersecting with historically elevated valuations. While long term “buy and hold” investors will be best served by looking through the volatility, active investors will be able to take advantage of ebbs and flows in sentiment and positioning.
Evercore ISI
For Japan, corporate reform and improving profitability are expected to drive Japan’s long term opportunity.
Evercore ISI
Expensive valuations have a history of remaining expensive for extended periods of time. We are less than a year into this current high-valuation regime. While they could suppress longer term returns, near term, elevated valuation levels alone do not end bull markets.
Evercore ISI
Underperform rated sectors are Energy, Industrials, and Materials. These sectors have lower exposure to the secular AI trends and higher exposure to a slower global economy, particularly sluggish Manufacturing – resulting in less favorable earnings growth and revision profiles and are more sensitive to a strong dollar and weak China.
Evercore ISI
Small-cap stocks head into 2025 having completed their long climb back to their 2021 all time high, with arguably their best prospects since the peak of their pandemic era outperformance almost four years removed.
Evercore ISI
Our outperform rated sectors are Communication Services, Consumer Discretionary, and Information Technology. Exposure to secular AI trends – as either Enablers or Adopters – features prominently in our selection.
Evercore ISI
Broad based earnings growth, a “still easing” Fed, generative AI and a business-friendly Trump administration support S&P 500 upside in 2025. Evercore ISI Strategy forecasts a year-end 2025 S&P 500 price target of 6,800. 2025e EPS is forecast to rise 9.6% to $263 while 2026e EPS is forecast to increase 9% to $287.
Fidelity
Our multi-asset team recommends looking beyond the previous stars to patches of the market that have been more neglected in the enthusiasm for AI and tech. They highlight US mid-caps, for thematic investors future financials, for income investors non-US duration, CLOs, and short dated high-yielding credit, and for drawdown-aware investors the value of absolute return strategies.
Fidelity
On equities we conclude that reflation will boost earnings, easing fears over higher corporate valuations. A pro- business, pro-innovation administration should prove helpful and lower interest rates should benefit capital-intensive industries and help cyclicals outperform. Optimism prevails in Japan and India.
Franklin Templeton
Returns will probably be close to long-term averages in the upper-single digits, including dividends. Prevailing valuations (which are relatively high) and historically high levels of profitability (on almost every metric) suggest that the super-charged double-digit returns of the past two years are probably not in the offing.
Franklin Templeton
Growth, earnings and valuations are likely to produce positive returns across global equity markets, with the US market once again leading. Over the next year, we believe global equity market leadership will come less from mega-cap tech companies, but instead via rotation into other sectors (as noted, already underway).
Franklin Templeton
Global equity investors can also tap into important themes to augment portfolio returns. Infrastructure buildouts in transportation, energy and communications remain pressing needs worldwide. Digital finance promises catalysts for financial disintermediation, innovation and growth. Demographic trends will continue to bolster asset gathering and asset management. And the rapid adoption of artificial intelligence (AI) creates vast opportunities across almost all industries.
Global X
An allocation strategy that aligns with a few key themes tied to US competitiveness in can offer reasonable upside and a degree of insulation from potential volatility: infrastructure development; defense and global security; automation, AI and onshoring; and energy independence and nuclear power.
Global X
Economic conditions are ripe for small- and mid-cap companies to perform well in 2025. While capital expenditure slowed in 2024, deregulation and increased business activity could encourage expansion and investment. If small businesses return to prior spending levels, this could provide a substantial lift to nonresidential private investment.
Global X
Economic uncertainty is likely to remain as financial markets weigh the tradeoffs and net effects of lower taxes, higher tariffs, reduced immigration, more stimulus, and less regulation. Yet Global X sees an opportunity for investors to target themes tied to US competitiveness that will likely resonate in the economic and policy backdrop ahead.
Global X
Equities and risk assets may be poised for another year of good performance; however, the unique set of economic and policy circumstances likely warrants a more targeted approach in 2025.
Global X
Income investors may want to adopt a more targeted approach going into 2025 given the policy uncertainty and potential interest rate volatility. Many debt instruments could underperform in a volatile interest rate environment, led by long duration. To minimize sensitivity to rate uncertainty, equity income strategies using covered calls, preferred stocks and energy infrastructure assets can offer solutions.
Goldman Sachs
We think our baseline forecasts justify higher equity prices and further dollar outperformance, but that judgment is more finely balanced than it was. As US equity markets take more credit for potential favorable policies, the risks of disappointment as the policy agenda ultimately becomes reality will rise. The backdrop justifies investors maintaining upside exposure to US equities, while diversifying or using options to limit the major tail risks.
Goldman Sachs
As in 2024, we think there are strong arguments for using options to provide protection against macro tails. Equity volatility has fallen post-election, making it easier to gain upside exposure to US assets through calls again. Deeper downside exposure (including in European equities, which are vulnerable to some key risks) also looks more attractively priced.
Goldman Sachs
Given subdued valuations and a pro-cyclical backdrop, EM equities are likely to outperform fixed income, with greater room for policy support in China (and to a lesser extent India). EM equities will likely struggle to generate higher returns relative to US equities, however, especially in vol-adjusted terms. And while EM hard currency fixed income should prove more defensive than local currency in a strong Dollar environment, local currency assets have more scope to outperform if the tails are avoided.
Goldman Sachs Asset Management
We expect the return structure of the stock market to broaden in 2025 against a backdrop of easing cycles and resilient growth. High valuations in some areas provide motivation for diversification. We see potentially undervalued long-term opportunities in the US, internationally and across the market cap spectrum.
HSBC Asset Management
With US valuations stretched, broadening profits growth could see a rotation within US equities towards neglected or defensive sectors that stand to benefit from policy actions, such as financials and industrials. Financials in particular would benefit from potential deregulation and increased M&A, while some industrials may benefit from tariffs, even with higher input costs
HSBC Asset Management
Assets currently priced for perfection could be the most exposed, paving the way for a significant shift in market leadership. Previously overlooked sectors such as value stocks, small caps and emerging market assets are likely to gain traction. This “great rotation” underscores the need to focus on local fundamentals and be nimble.
HSBC Asset Management
We expect GDP and profit growth to converge in advanced economies, suggesting that investment markets outside of the US have room to perform. Neglected parts of global stock markets — such as value stocks — have an opportunity to catch up.
HSBC Asset Management
US equities could see continued strength, albeit limited by valuation concerns and interest rate sensitivity. As growth stabilizes and inflation remains under control, we expect to see high-quality equities outperforming.
HSBC Global Private Banking
Many companies are sitting on cash which they will be happy to put to work, while others will take advantage of lower borrowing costs to invest. More M&A and more share buybacks will boost shareholder value and support stock markets.
HSBC Global Private Banking
In equities, US valuations are well above average and stocks’ upside will thus mainly depend on EPS growth. So we look for companies that can innovate and be well-positioned for structural trends. The US remains our principal equities overweight, together with the UK, India, Singapore and Japan. We remain overweight on technology but continue to diversify into communication services, financials, industrials, healthcare, and utilities.
Janus Henderson
Within equities, a broadening of US market performance beyond the Magnificent Seven may improve the return prospects of innovators outside of technology, and the sanguine economic environment and falling financing costs put small- and mid-cap stocks in a particularly favorable light.
Janus Henderson
Outside of the US, lower premiums and upside potential warrant a second look. China’s policy support will need to continue if it is to meet the magnitude of the country’s economic challenges. This, in turn, could support select European companies that export to China. Other areas of interest include India, where reforms are helping create a high-growth backdrop, and Japan, where supportive corporate governance reforms are being enacted.
Jefferies
We continue to find the macro backdrop as positive for risky assets. In our view it’s still a US vs Europe story with US exceptionalism to continue and Trump tariffs hurting European growth. We see S&P reaching 6,500 in 2025 but expect greater volatility in the price action.
Jefferies
Within equities, we remain long financials as the sector should benefit from deregulation. We are taking a step back from Big Tech and believe that equal weighted S&P would be a better index to be long rather than normal S&P. We expect small caps to outperform large caps in 2025.
Jefferies
European equities do look attractive from a valuation perspective. We think its too soon to start playing the long Europe story. But at some point, potentially around early in the second quarter, when Trump tariffs will prove less onerous than feared, and we could be looking at more fiscal stimulus from Europe and China along with better geopolitics, we would look to overweight Europe.
JPMorgan Asset Management
We expect extraordinary earnings growth will settle at still-elevated levels for mega-cap tech while reaccelerating in other areas of the US market. This broadening, coupled with resilient economic fundamentals, policy tailwinds and secular trends, should support a more inclusive rally in the year ahead.
JPMorgan Chase & Co.
The current polarized regional equity performance will likely remain in place going into 2025, with US equities preferred over euro zone and Emerging Markets. As 2025 progresses, there exists the potential for a convergence trade, given extreme relative positioning, valuations and price divergences across regions. However, more clarity is first needed on global trade and geopolitics. In the meantime, lack of a quality substitute to US equities remains the reality.
JPMorgan Chase & Co.
Within Europe, UK could be more shielded with respect to trade headwind, given smaller manufacturing base and lower beta to the index. On the other side, euro zone remains an underweight given a combination of persistent growth and earnings downgrades, challenging politics and disappointing China growth.
JPMorgan Chase & Co.
Our 2025 S&P 500 price target is 6,500 with EPS of $270 (+10% y/y). Further easing in rates should help broaden the earnings recovery within S&P 500 and across the size spectrum. The central equity theme for next year is one of higher dispersion across stocks, styles, sectors, and themes driven by unsynchronized regional business cycles and central bank policies, evolving policy agenda of the new US administration, broadening earnings growth and crowded momentum factor positioning.
JPMorgan Chase & Co.
In the regional portfolio, stay overweight Japan. Japanese equities stand to benefit from domestic reflation with improving real wage growth, accelerating buybacks and continued corporate reforms.
JPMorgan Wealth Management
Europe’s domestic productivity woes do not mean that investors should ignore the top European companies. The 50 largest European companies derive only about 40% of their revenues from Europe, and the “national champions” within this cohort are dominant global players and best-in-class operators. That said, we prefer US equities to European equities in 2025.
JPMorgan Wealth Management
As governments reassess their national security, they will likely deliver higher levels of capital investment. Security covers not just traditional military defense, but cybersecurity, supply of critical natural resources, energy production, transportation and infrastructure. We think markets do not yet fully appreciate the investment prospects that this secular shift will create.
JPMorgan Wealth Management
We think capital investment into the power sector is about to ignite for three key reasons: the reindustrialization of US manufacturing, increased use of electrification in clean energy solutions and surging demand from data centers. Investors looking to capitalize on the growing demand for power can focus on broad infrastructure funds, power generation and utility companies.
JPMorgan Wealth Management
While index concentration in big tech firms remains a concern (the top 10 companies account for 36% of S&P 500 market capitalization, the highest on record), every sector in the S&P 500 is expected to deliver positive earnings growth in 2025. This hasn’t happened since 2018.
JPMorgan Asset Management
The prospect of deregulation and corporate tax cuts may finally give investors conviction to add to previously unloved areas of the market, like value and mid/small cap stocks, which are also benefiting from earnings recovery and attractive valuations. However, volatility may be ahead should more growth-negative policies emerge, such as tariffs.
JPMorgan Asset Management
A shift in sentiment and earnings for European equities will depend largely on a rebound in China, a manufacturing upturn or stronger consumer spending — all challenging to overcome in 2025. However sector-level discounts, combined with healthy buybacks and dividend yields, present compelling opportunities in select European companies.
JPMorgan Asset Management
Despite the risks, international equities offer investors the chance to diversify beyond expensive US markets. Adopting an active approach is crucial for capturing attractive opportunities fueled by powerful long-term trends, while also skillfully maneuvering through the policy fog ahead.
JPMorgan Wealth Management
Japanese corporations have in recent years made major strides toward improved corporate governance and more shareholder-friendly practices. Corporate buyback announcements in 2024 doubled the previous record. This trend should benefit private equity investors in Japan as well.
JPMorgan Wealth Management
While we believe DM equities will outperform EM equities next year, Taiwan, India, Indonesia and Mexico stand out to us as regions that could deliver solid returns to shareholders in both public and private markets.
Lombard Odier
We expect the US elections and potentially German elections to act as catalysts in developed markets to convert some of the reported infrastructure investment needs into infrastructure spending. In equities, we focus on stocks from companies along the length of the value chain, from materials to infrastructure operators, which will benefit from rising infrastructure spending.
LGIM
Amid conviction in yet more US equity outperformance, investors are prepared for the worst in Europe, Australia and Far East (EAFE) equities. With the hurdle for positive surprises low, we will be looking to add risk in non-US equities where we see opportunities. Japan is likely to be toward the top of this list. Investor appetite for Japan is subdued, while corporate profitability has been on a rising trend, with little by way of multiple expansion.
Lombard Odier
In equities, the outlook for earnings is strong, yet valuations are already very high. Where valuations look more appealing, the earnings outlook is less enticing. In the US, we expect deregulation and lower taxes to extend economic and equity market exceptionalism. Trade tariffs will weigh on growth elsewhere. We favour Japanese equities in non-US developed markets and Korea/Taiwan in emerging markets.
Lombard Odier
Macroeconomic conditions and the investment needs of a multipolar world are likely to benefit cyclical sectors. We believe materials will be the first to benefit from the tailwinds this creates. More sectors will follow, including industrials, later in the year.
LPL Financial
Expect modest stock market gains in 2025, supported by a stable economy, solid corporate profits, a Fed that is no longer hawkish, and some potential deregulation tailwinds. With stocks pricing in a lot of good news, positive surprises may be tougher to come by, so a repeat of 2024’s performance is unlikely. With the bull market another year older, interest-rate risk rising, valuations elevated, and still significant geopolitical threats, be prepared for bouts of volatility in 2025, and consider buying equities on market pullbacks. Our S&P 500 fair value target range for 2025 is 6,275 to 6,375.
Morgan Stanley
Emerging-market equities are still out of favor, and any potential increase in trade tensions would only make them less attractive.
Morgan Stanley
Fixed-income markets may benefit in the first half of 2025 as modest growth and lower inflation prompt additional interest rate cuts. In the second half of the year, relative value should shift toward equities if policy supports a meaningful pickup in mergers and acquisitions. But timing the rotation will be everything.
Morgan Stanley
Investors should consider stocks and spread products in fixed income in 2025, and US and Japan equities are likely to be the most attractive.
Morgan Stanley
The outlook moves European equities to neutral. Europe is growing more slowly than the US, and it’s exposed to tariff risks and further slowing in China, which faces continuing deflationary pressures.
Morgan Stanley
Equity valuations are more stretched than they were six months ago, but this is justified by company fundamentals and growing certainty about the economy.
NatWest
Our investments continue to be weighted toward risky assets, specifically global equities, which should include multinational companies with strong profit-making potential.
Ned Davis Research
Our year-end S&P 500 target is 6,600, or 9% above current levels, with the risk for the market to overshoot and give back some gains in the second half. We would look to rotate into defensive styles and sectors. We enter the year favoring mid-caps and neutral on growth/value, but are prepared to rotate to large-caps and defensive value.
Neuberger Berman
The stage is set for broadening equity market performance. Deregulation, business-friendly policies, moderating inflation and lower rates may allow a broadening of earnings growth and price performance.
Neuberger Berman
Mega-cap technology growth rates are likely to decelerate and normalize as capital expenditure ramps up. Value and small-cap stocks, and sectors such as financials and industrials, could begin to catch up with mega-cap technology.
Neuberger Berman
Non-US markets could perform more strongly on higher global growth and lower commodity prices. Relative valuations, as well as fundamentals, should provide support for this theme.
Northern Trust Asset Management
We maintain a preference for equities over fixed income. We expect US equities to benefit from an economic soft landing and healthier corporate profits than most other regions. In 2025, we expect more modest gains for 60/40 portfolios with US equities leading the charge again. We are also constructive on small cap equities, which will likely benefit from lower interest rates as about half of small cap debt is floating interest rate.
Nuveen
While the AI boom should remain a key US growth driver, we believe investors should broaden their allocations. We are growing more positive toward US small caps that could benefit from shifts in tax policies, rising M&A activity and more protectionist trade practices.
Nuveen
In equities, we generally favor higher-quality segments, leaning toward industries and geographic regions that offer fundamental tailwinds. Likewise, we are less positive toward areas with a higher degree of economic or interest rate sensitivity.
Nuveen
Geographically, we continue to believe US stocks offer the best combination of defensive characteristics and growth opportunities, although we are seeing some shifts in relative opportunities.
Nuveen
Energy demand is growing exponentially, but supply and transmission aren’t keeping pace. This imbalance suggests investing in green energy technologies, nuclear power and natural gas production to help fill the supply/demand gap as renewables ramp up.
Pictet Asset Management
Resilience will be the distinguishing feature of global equity markets in 2025, with companies likely to deliver steady earnings growth, translating into single digit returns for investors. We expect US equities to outperform. The US economy is still growing much faster than that of any other major developed country (albeit the gap is set to narrow somewhat in 2025). US corporate earnings are also increasing at a faster pace than elsewhere with continued traction on AI adoption benefitting the US-centric ecosystem.
Pictet Asset Management
Our wild card pick for 2025 is the unloved UK equity market. The UK is less exposed to US tariff hikes than the euro zone because it is more focused on services (which are unlikely to be impacted by Trump’s measures) and has no goods trade surplus with the US. The dominance of energy stocks and defensive sectors in the FTSE 100 also makes it an attractive hedge for stagflation – which we see as the biggest risk to our base case scenario.
Pictet Asset Management
Banks are our preferred soft-landing play – we expect strong loan growth in a benign growth environment given healthy private sector balance sheets; valuations also remain very attractive. Utilities are our favourite defensive sector that typically benefits from lower bond yields and has a strong tailwind from increased electricity demand. In communication services we see continued strong earnings dynamics and exposure to secular growth themes of AI and digitalisation.
Pictet Asset Management
The tax cuts and deregulation measures expected from the Trump administration should deliver a significant boost to corporate bottom lines. However, we expect this to be largely offset by the negative impact of increased trade tariffs and tighter immigration rules.
Pictet Asset Management
Though the risks appear greatest for emerging markets, we feel they offer value under out central scenario. Stocks will be supported by globally coordinated easing and benign domestic inflation dynamics while growth conditions remain robust.
Principal Asset Management
The backdrop bodes favorably for small-and mid-capitalization stocks, which quietly outpaced the long-dominant large-caps in the latter half of 2024, yet still offer historic relative valuation discounts.
Principal Asset Management
Improving economic conditions, growing corporate earnings, solid balance sheets and favorable credit conditions provide a constructive backdrop for global equities. Nothing on the equities horizon is raising broad warning flags, but vigilance is needed as disappointments will be punished amid the current high expectations.
Principal Asset Management
Opportunities will likely arise in companies residing in economically sensitive industries and overlooked sectors. There are many examples of companies generating resilient free cash flows trading at attractive valuations across various economically sensitive sectors, including materials, capital goods, consumer cyclicals and financials. The resilient but out-of-favor health care sector could experience improved breadth driven by greater M&A in response to recent market conditions.
Principal Asset Management
While numerous challenges and risks persist — most notably ongoing economic weakness in Europe and parts of Asia — the depressed valuations in these regions create attractive entry points for long-term investors in firms generating resilient economic returns.
Robeco
The path for equities may be treacherous as the incoming macro data will sometimes represent a hard landing narrative. Historically stretched US valuation levels against a backdrop of elevated geopolitical risk leaves the market susceptible to (deep) sell-offs and warrant protection against downside risk.
Robeco
High yield typically outperforms equities on a 12-month horizon only once starting spreads are above 700 basis points. As this level remains out of sight in our baseline scenario, we prefer taking equity risk in 2025.
Robeco
We see ultimately a stagflationary twist emerging from Trump’s policy agenda. After the initial hope phase, equities could face headwinds as the implications of a tariff wave become more tangible. In our base case, we expect mid-single-digit returns for the S&P 500 with 9% EPS growth, but higher real yields will likely reduce the high US equity multiples throughout 2025.
Robeco
Within the equity space, we see room for US small-cap and value stocks as tariffs will benefit domestic companies, aligning with an anti-globalist presidency. Reducing the US corporate tax rate to 15% might especially benefit smaller companies. At the same time, small caps and value have lagged a growth-driven rally, are still cheap.
Robeco
Europe trails behind the US in the cycle. We expect a rise in European multiples, given the continent’s positive earnings surprises and relatively lower discount rates creating multiple expansion, lowering the existing historically large discount on P/E basis versus the US.
Russell Investments
We believe that post-US election dynamics, improving earnings, and attractive valuations may create compelling opportunities for US small caps in the year ahead. We also see a steepening yield curve offering opportunities in short-term bonds, as short-term rates are expected to decline faster than long-term yields.
Russell Investments
We are focused on US small caps, where post-election dynamics, improving earnings, and attractive valuations may create compelling opportunities. We also see growth managers targeting high-growth cyclicals like software, while value managers identify M&A (mergers and acquisitions) potential in financials and healthcare. Core managers are balancing cyclical exposure and managing risks in rate-sensitive sectors.
Russell Investments
Elevated equity valuations make the US market vulnerable to negative surprises, and further dollar strength will challenge emerging markets. Sustained Treasury yields above 4.5% could challenge equities, diminishing the earnings yield advantage stocks have enjoyed over bonds since 2002.
Russell Investments
We expect increased market volatility from US foreign policy actions to create opportunities for active managers to find quality companies temporarily impacted by headline risks.
Schroders
The S&P 500 is looking expensive but valuations away from the mega caps and outside of the US appear more reasonable. Equity investors have grown used to a small number of large companies powering the stock market’s gains; however, this pattern is already changing. We think there is potential for markets to broaden out further in the US, particularly given Trump’s focus on deregulation and corporate tax cuts.
Societe Generale
Japanese growth is looking more robust than expected, while the wage and inflation outlook will probably trigger monetary policy normalization. We remain heavily exposed to the yen (17% in total, although cut by 3 percentage points) based on the monetary policy divergence with the US and Europe, and the massive undervaluation (read: one of the best expected returns). Japanese equities remain a relatively attractive asset, in our view, backed by solid balance sheets and more supportive shareholder-value policies.
Societe Generale
We recommend gearing equity baskets to the dominant mega-trends of our time: the shifting trends in trade and investment (US reshoring, Asia trade); energy (nuclear energy, given its importance in the transition period, allowing us to decarbonize with competitiveness); and defense, especially focused on European defense spending.
Societe Generale
We raise our US equities slightly by 3 percentage points to 30% (and raise the overall equity weighting by the same to 45% of the entire portfolio), a moderate move considering already stretched valuations, with a 3.2% equity risk premium (we recommend avoiding US equities below the 3% mark). To protect the equity allocation from the looming trade war, we reallocate from continental Europe (-3) to the UK (+3) and from China (-2, from overweight to neutral) to Japan (+2).
Societe Generale
The robust growth outlook and falling oil price are supportive of growth-driven assets. Corporate profits should remain solid and margins high, particularly in the US where corporate taxes could stay low (or even lower) helped by likely deregulation.
Societe Generale
An important debating point for markets in the run-up to the German general election (23 February 2025) is the increasing likelihood of the debt-brake rule being removed, and a fragmentation of the main political forces, as in France. This implies that the party(ies) in power would almost certainly need to secure the 2/3 majority in both chambers of parliament needed to change the constitution. We continue to recommend heavy overweights in the peripheral markets versus the core markets, in bonds and equities, and increase the weighting towards the UK. We like banks in Europe too.
State Street
Within global equity markets, the resilient economic backdrop provides support for earnings, particularly in the US. Outside the US, we expect Japanese equities to move sideways due to potential volatility, while Chinese equities may struggle in sustaining higher growth and strong performance despite the short-term relief from the country’s stimulus program.
State Street
We believe US large cap equity will maintain its structural advantage to the rest of developed markets and see the outlook for emerging markets as more nuanced as investors balance economic and earnings growth, and easing inflationary pressures versus geopolitical risk and a strong US dollar.
T. Rowe Price
As we emerge from a period dominated by US tech, international equities may offer breadth and room for growth. Diversifying into areas that have valuation support and robust fundamentals, such as value and small cap stocks, seems prudent. Japan, Korea, and the UK could also benefit from structural changes.
T. Rowe Price
We see a broadening opportunity set in equity markets. Small caps should benefit from further interest rate cuts and any signs of an improving economy. Underappreciated sectors like energy, financials, and industrials could also offer opportunities, signaling a stock-pickers’ market.
Tallbacken Capital
The transition to a pre-GFC regime continues for older economy companies. Earnings, not P/E expansion, will define next year’s rally. We estimate 5% growth in the SPX Equal Weight Index in 2025 and up to 8% from 2025 to 2026. Our presumption is that de-regulation and AI will help boost margins in 2026.
Tallbacken Capital
Our year end price target for the S&P 500 is 6,500. This is predicated on a year end 2025 P/E of 22x forward earnings and a P/E modestly below current levels. We are forecasting earnings of $265 in 2025, $297 in 2026. However, if earnings momentum falters, we should expect significant consolidation and P/E contraction. This rally will be, once again, driven by large tech.
Tallbacken Capital
Large tech stocks will remain the core pillar of the rally. While Mag7 earnings will likely not be as great in 2025 as they have been in 2023-4, this segment will demonstrate again that it has the highest quantity and highest quality (lowest volatility) of earnings growth.
Truist Wealth
We expect the equity bull market — which still trails the typical up cycle in both price and duration — to be sustained by an ongoing economic expansion that boosts corporate profits, easing monetary policy, and continued fiscal support.
Truist Wealth
From a global asset allocation perspective, we enter 2025 maintaining our equity bias and our long-standing preference for US stocks relative to international.
Truist Wealth
We retain our positive view of US large caps given better fundamentals and earnings trends. We have turned more favorable towards mid caps given pro-growth policies, attractive relative valuations, and improving technical trends.
Truist Wealth
Our tactical sector preferences, which tend to be shorter term in nature, continue to be technology, communication services, and financials. The AI story remains a dominant theme of this bull market, and profit trends remain superior to the overall market. Financials should benefit from pro-growth policies, deregulation, and rise in mergers and acquisitions.
Truist Wealth
The positives are partially offset by elevated market valuations and investor optimism indicating that the bar for positive surprises has been raised higher. These factors, alongside wider policy outcomes, suggest a bumpier ride relative to the past year. Investors should look to capitalize on opportunities that are likely to present themselves in the context of an ongoing uptrend.
Truist Wealth
The underperformance of the international markets, amplified by the US election, is nearing a short-term extreme. There are potential catalysts, such as follow through on China stimulus, easing Ukraine-Russia tensions, and a weaker dollar. While these developments may trigger sharp bounces in the international markets, the primary trend remains in favor of the US.
UBS
2025 should bring further upside for stock markets. The US is a preferred market, while diversified exposure to Asia ex-Japan could be an effective way to capture potential upside in the region while managing risks. In Europe, euro zone small- and mid-caps and Swiss high-quality dividend stocks look attractive.
UBS
The S&P 500 could reach 6,600 by the end of 2025 driven by solid US growth, lower interest rates, and AI advancements.
UniCredit
With economic growth likely to accelerate during 2025, the appeal of cyclical sectors will probably rise, making small- and mid-cap companies attractive relative to large caps. In relative terms, this could temper the momentum of technology stocks, whose robust earnings growth is already reflected in high valuations.
UniCredit
Our year-end equity targets for 2025 range from +8% for Europe to +15% for the US. Japanese and Chinese companies are projected to show growth potential similar to Europe, each at +8%. Thus, we see the highest stock-market potential in the US, followed by Europe and Japan. While China’s markets may exhibit some tactical catch-up potential, this will be limited by uncertainty surrounding tariffs.
UniCredit
US equities will probably show the highest potential in the coming quarters, despite high market concentration and elevated valuations, but opportunities will also arise in other regions. We expect profit margins to remain highest in the US, albeit slightly lower, and we think the divergence in corporate earnings growth between the US and Europe that we have observed this year will continue in 2025.
Vanguard
US equity valuations are elevated but not as stretched as traditional metrics imply. Despite higher interest rates, many large corporations insulated themselves from tighter monetary policy by locking in low financing costs ahead of time. And more importantly, the market has been increasingly concentrated toward growth-oriented sectors, such as technology, that support higher valuations.
Vanguard
Ultimately, high starting valuations will drag long-term returns down. But history shows that, absent an economic or earnings growth shock, US equity market returns can continue to defy their valuation gravity in the near term.
Vanguard
International valuations are more attractive. We suspect this could continue as these economies are likely to be most exposed to rising global economic and policy risks. Differences in long-term price/earnings ratios are the biggest driver of relative returns over five-plus years, but economic growth and profits matter more over shorter horizons.
Vanguard
Within emerging markets, China is the sole reason valuations are below fair value, but the risks of rising trade tensions and insufficient fiscal stimulus in China pose additional headwinds.
Wells Fargo Investment Institute
Earnings should be the primary driver of 2025 prices across equity asset classes. We expect that a broadening and acceleration of economic growth, spurred on by a Fed easing cycle, significant new deregulation, and resilient consumer, should fuel healthy top-line sales growth while the past two years’ focus on cost control should help turn revenue growth into profit growth. Year-end 2025 S&P 500 Index midpoint of 6,600.
Wells Fargo Investment Institute
Ample cash on the sidelines and continued elevated levels of federal government spending and Fed interest-rate cuts bolster the case for a full allocation to equities, in our view.
Wells Fargo Investment Institute
We prefer the S&P 500 Index Energy, Communication Services, Financials, and Industrials sectors over a tactical horizon through 2025. And while these favored sectors seek to take advantage of growth opportunities, we think it is equally important to avoid areas of the market that are defensive in nature and may detract from tactical performance, like Consumer Staples and Utilities.
Wells Fargo Investment Institute
Besides fixed income, investors may earn dividend income from equities. US large-cap companies have accumulated over $2.4 trillion in cash on their balance sheets and could choose to initiate or increase dividend payouts.