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JPMorgan’s latest analysis suggests that investors can anticipate a continued rise in the US stock market for the next year, despite the S&P 500 index having surged more than 50% since the beginning of 2023. David Kelly, Chief Global Market Strategist at JPMorgan, stated that strong corporate earnings and a broader robust performance of the US economy should continue to drive the stock market higher in 2025.
The risks lie in high valuations and overly concentrated investment portfolio positions, as well as policy uncertainties from President Donald Trump’s administration. However, he believes there are enough positive factors to maintain the current momentum. “There is no indication that the uptrend will necessarily end. We will see continued economic growth over the next two years, and overall, corporate earnings will rise,” he said in an interview.As the S&P 500 index is expected to achieve a return rate of over 20% for the second consecutive year, some Wall Street professionals are increasingly concerned that this uptrend might gradually fade as valuations become too high. Kelly also acknowledged that inflation could make a comeback based on Trump’s protectionist trade policies, sparking concerns that the Federal Reserve might have to retract its rate-cutting plans.
“There are many places where things could go wrong,” he added, “If we follow through on all of Trump’s campaign promises regarding tariffs, immigration, and taxes, there could ultimately be severe inflation.” To hedge risks, Kelly advised investors to increase their overseas exposure. He stated that international stocks have long-term growth potential and dividend yields that are twice those of US stocks. A key theme in JPMorgan’s outlook for the coming year is that sectors outside of large technology stocks will catch up. Bloomberg’s “Seven Giants” index has risen by 55% this year, more than double the increase of the S&P 500 index. In terms of sectors, JPMorgan is bullish on financial stocks, believing that the financial industry benefits from deregulation and potentially higher long-term interest rates, which will push up net interest income. Consumer goods companies focused on affluent customers should also perform well, given the continuous rise in demand for luxury goods and services. Healthcare industry stocks are expected to show positive performance due to innovation in the sector. Investors should add small-cap stocks to their portfolios as they emerge from cyclical downturns. “I want to be as broad as possible,” the bank added. Like other Wall Street forecasters, Kelly stated that high valuations are a risk. He added that the concentration of investment portfolios is higher, making investors more susceptible to any potential shocks.However, although these risks are imminent and the uncertainty surrounding how the Trump administration will shape the economy is also increasing, Kelly is not the only one with an optimistic attitude. Wall Street heavyweight investment banks such as Goldman Sachs Group, Morgan Stanley, and UBS Group all expect the US stock market to rise further in 2025. New Wonderful Investment Research Assistant. Experience it now. (Source: Caixin News Agency)