Investing.com – Investors should expect some moderation in growth in 2025 after two years of more than 20% expansion in the benchmark index, according to BTIG analysts led by Jonathan Krinsky.
Despite a somewhat bleak end to 2024, all major US indexes posted double-digit annual increases, with the S&P 500 in particular notching its best two-year performance since 1997-98.
Much of the optimism was fueled by the Federal Reserve's decision to begin cutting interest rates from multi-year highs.
Policymakers have optimistically pointed to a decline in inflationary pressures since their peak in 2022, although some have noted that this easing has slowed in recent months. Fed Chairman Jerome Powell said in a news conference last month that while policy is in a “good place,” the central bank will now take a more “cautious” approach to further cuts.
The administration of incoming President Donald Trump, as well as a string of victories by other Republican candidates in crucial November elections, has also raised hopes that companies will benefit from a new era of looser regulation and tax cuts. However, uncertainty remains over Trump's plans to impose tough tariffs as well as large-scale deportations – and whether these moves could reignite inflation.
Elsewhere, growing interest in artificial intelligence has led to a jump in many stocks exposed to the emerging technology. Nvidia (NASDAQ:) has emerged as the biggest global gainer by market cap in 2024, thanks in large part to growing demand for its AI-focused chipsets across a range of industries. The company added more than $2 trillion in market capitalization in 2024, closing the year at $3.28 trillion, making it the second-highest valuation among listed companies in the world.
BTIG's Krensky noted that while stock markets in the first half of 2024 were mostly supported by a rally in big-name names like Nvidia, many investors expected those gains to widen once the Fed starts cutting interest rates.
However, Krensky noted that this widening, as measured by the percentage of stocks in the Russell 3000 trading above its 200-day moving average, peaked in mid-July. By December 30, less than 60% of the S&P 500 components were above their 200-day moving average — the weakest level since 2023.
“As always, a broad-based collapse is either a warning sign or an opportunity. We saw a similar setup in late (20)21, and that was clearly foretelling of fundamental issues ahead of the (20)22 bear market,” Krensky said. .
“Conversely, similar formations at (19)96, (20)04, (20)14, and (20)18 were all opportunities before strong rallies. Our base case at this point is that the recent divergence portends some tape extension.” “It's a rubber band between the growth of large companies and the rest of the market, and some bounce is likely to occur, with winners catching up with losers as rebalancing and tax selling takes hold.”
After the initial jolt, there could be some upside in cyclical/value trade, as long as macroeconomic data “continues to hold up,” he added.
“While it may mean a less dovish Fed, ultimately strong data should be bullish for stocks over time,” Krensky said.
With that view in mind, here are some of BTIG's top picks for the first half of 2025.
Bloom Energy Company (NYSE:): “The stock has been on a steady downtrend for nearly four years from early 2021 through late (20)24. The gap higher in November appears to have been a game-changer, with a strong uptrend continuing.”
Expedia a company (NASDAQ:): “Great base from 2022 to 2024, but the stock broke out in November and has been consolidating over the past couple of months. If it can break above $192, it should test its previous all-time highs from early 2022 in the $210-$220 range.” “
Globus Medical (NYSE:): “After a multi-year bear market from 2021 to 2023, the stock has stabilized and reversed that downward trend, finally surpassing its 2021 peak in December. While further consolidation may be warranted, there is strong support in Area 75-80 range.”
Health equity (NASDAQ:): “After a multi-month consolidation in the first half of (20)24, the stock broke out of the range in November with a gap up. After pulling back to nearly fill the gap, it once again started to move higher.”
Ali Holding (NYSE:): “The stock has seen a very consistent uptrend over the past six months, with prices consolidating, then moving higher, then consolidating again. It has been consolidating recently since mid-November, and appears poised for another upward move that should… Takes it north of $60.”
Regency Centres (NASDAQ:): “With a sideways trading range through most of 2022-2023, the stock began rising last summer. After peaking in September, it has moved essentially sideways over the past few months. This creates an attractive entry point (.. .)”
Block Company (NYSE:).: “The stock spent most of 2022-2024 in a sideways trading range. In November, it finally broke out of that multi-year resistance around $90. After trading up to about $100, it consolidated the breakout and is now poised to resume the uptrend.” “
VERONA PHARMA LIMITED (NASDAQ:): “The stock has had a very strong trend that is only six months old. The stock is up more than 4x since the May lows, but as long as the uptrend remains intact, we will stick with the stock.”
