UBS Analysts Think These Industries Are Set to Shine in 2025!
As 2024 draws to a close and 2025 approaches, UBS analysts wrote in a report to clients that investors should closely monitor stocks in several key industries until next year.
UBS analysts suggested in a report on Monday that investors should allocate funds to technology, financial, industrial, and utility stocks. They pointed out that under current market conditions, and with expectations for President-elect Donald Trump to implement pro-business policies, these sectors are expected to perform strongly.
The analysts stated that technology remains the preferred sector, with the potential to outperform the broader market next year, with an expected increase of 19.8% in 2025, compared to a 9.4% increase in the overall market.
In recent months, technology stocks have driven the S&P 500 index to new highs in a bull market rebound, with technology stocks accounting for nearly 35% of the total profits of the S&P 500 index over the past year. While some strategists are concerned that a market bubble may be brewing, UBS analysts remain optimistic.
They also favor financial stocks, believing that they will benefit the most from Trump's pro-business policies. It is widely expected that Trump's stance on deregulation and proposed corporate tax cuts will promote trading activity and profit growth, thereby driving up financial stocks.
The analysts wrote that entering 2025, industrial stocks will also perform well. They said that these stocks appear more attractive than non-essential stocks, despite the latter leading all sectors with a 13.3% increase in November. Analysts downgraded their rating for non-essential stocks (excluding Amazon) to neutral.
Meanwhile, analysts say that utilities are the best defensive stocks under the strong demand for energy from artificial intelligence and electric vehicles. In recent months, the utilities sector has performed well, with the MSCI ACWI Utilities Index rising about 20% so far this year, as artificial intelligence data centers have driven up electricity usage in the United States.
In addition, analysts have a neutral stance on healthcare stocks and a reduced stance on energy, materials, consumer staples, and real estate investment trusts.
These recommendations come as the U.S. stock market has rebounded strongly after Trump won the U.S. election, with a return of 5.9% in November. Cyclical sectors performed best as investors shifted to a risk-on mode.
In November, cyclical stocks outperformed technology and non-cyclical stocks, led by non-essential stocks, financial stocks, industrial stocks, and energy stocks. Among the various sectors, stocks most sensitive to the economy and most susceptible to tail risks performed well.
On Monday, large technology companies continued to strengthen, kicking off the last month of 2024 for U.S. stocks. By the close, the Dow Jones Industrial Average fell slightly, while the S&P 500 and Nasdaq indexes hit new highs. The S&P 500 closed up 0.24%, at 6,047.15 points.