Despite Already High Valuations, the US Stock Market Is Poised for A Stellar 2025
2min read In the recent outlook report released, major Wall Street banks generally expect the US stock market to maintain a leading return rate in 2025, with large-cap indices such as the S&P expected to achieve a gain of over 25% for the second consecutive year.
Analysts say that despite the high valuations of industry-leading companies and the policy mix of the Trump administration still bringing uncertainty to the stock market, strong economic growth and the AI revolution are expected to continue to support the rise in the stock market.
Societe Generale strategist Albert Edwards said, TINA is about to make a comeback, which means There Is No Alternative to owning equities.
JPMorgan's Lakos-Bujas thinks that, due to policy changes brought about by the government transition in 2025, American exceptionalism may face turbulence and increased volatility, but opportunities may outweigh risks.
High Valuations, Higher Expectations
At present, US stocks remain the most expensive in the world. FactSet data shows that the market value of US stocks now accounts for more than 50% of the global stock market value, the highest level since the end of 2001.
At the same time, most bullish Wall Street analysts believe that excellent profitability may continue to push up stock prices and prove the recent multiple expansion of valuations to be justified.
The good prospects for US economic growth also support this argument. The latest data shows that the US GDP growth rate in the third quarter reached 2.8% on a quarter-over-quarter basis, driven by strong consumption, a rate higher than other developed markets.
UBS team said that compared with foreign households, American households have more net assets allocated to stocks, which helps to amplify the wealth effect on the economy during market rallies.
The bank added that if global economic growth slows down, the attractiveness of US stocks to foreign capital will further increase, and it is expected to continue to benefit from it.
Taking into account all factors, despite being expensive, US stocks may still become the best choice in the minds of investors.
Therefore, JPMorgan Asset Management's Chief Global Strategist David Kelly's team said that although it must be admitted that overseas markets have low valuations and are attractive, there is still no substitute for US stocks:
Tech Stocks Remain the Profit Pivot
Analysts believe that tech stocks will continue to be the main driver of US stock profits.
Barclays US stock strategist Venu Krishna said that the fulcrum of profits still mainly comes from tech giants and is expanding: The earnings expectations for U.S. stocks are quite healthy. The profitability pivot remains concentrated in large tech companies, but in terms of direction, other parts of the market are moving in the right direction, although at a much slower pace than expected.
For the artificial intelligence boom that has emerged in recent years, Krishna believes that although there is still a lot of uncertainty about the return on investment in artificial intelligence for companies, productivity will gradually increase with the passage of time, helping to increase corporate profits.
There is also an analysis that Trump 2.0's inclination towards corporate tax cuts and deregulation may help to further increase corporate profits while stimulating the economy through more deficit spending.