Investing.com – Oppenheimer Asset Management advises investors to remain focused on long-term opportunities amid market volatility, suggesting that the coming year will offer compelling opportunities to capitalize on overlooked assets.
In its latest report, the investment management firm outlined the importance of maintaining flexibility and diversification at a time when markets are undergoing a complex transition from high interest rates to a more normal economic environment.
Stock markets in 2024 showed remarkable resilience despite intermittent declines caused by inflation fears, rising interest rates, and geopolitical tensions. These pullbacks, often viewed as “pruning” or “trimming,” have allowed the broader bull market to remain intact.
Oppenheimer strategists led by John Stoltzfus argue that such periods of market decline create opportunities for investors. “We suggest investors look for 'babies who are thrown out with the bathwater' when there is a market downturn,” the note asserts.
The report identifies key drivers for 2025, including the measured pace of Fed rate cuts, technological advances, and consumer resilience.
The Fed, which began unwinding restrictive monetary policies in September 2024, is expected to cut interest rates further, albeit cautiously. The stock market fell last week as the Federal Reserve's updated forecast indicated just two interest rate cuts in 2025, down from three previous forecasts and less than the four to five cuts expected in the futures market.
However, Oppenheimer praises the central bank for its efforts to balance inflation control with employment stability, describing its actions as crucial in achieving a “relatively soft landing after some significant periods of turmoil in the economy and markets.”
In terms of sector preferences for 2025, the company favors technology, communications services, consumer discretionary products, and industrials.
“Today's technology, including artificial intelligence, is likely to parallel the automobiles of the early 20th century,” the strategists highlight.
For investors seeking broader diversification, Oppenheimer points to opportunities in small- and mid-cap stocks, which are expected to benefit from easing interest rates. Furthermore, it is recommended to maintain some exposure to cash to “offset the risk of the equity portfolio.”
Oppenheimer also maintains a small position in , reflecting purchases by emerging market central banks to prop up their currencies and investors hedging against persistent inflation in the US and globally.
Overall, while geopolitical risks, domestic policy shifts, and the global economic recovery remain potential headwinds, Oppenheimer's forecast suggests that the resilience of the US economy, driven by strong consumer demand and creativity, will continue to support equity performance.
“Even as things improve, there may be setbacks or unrealistic expectations that trigger the situation; “A detour does not usually lead to the end of the journey,” the report concludes.
