Investors who have watched from afar as stocks have soared to new highs over the past two years may be presented with an interesting hotspot in 2025.
This year could be a wonderful opportunity for investors who believe that the rise in stocks from 2023 seems unsustainable. Even if Wall Street continues to see stocks rise, it may not be as fast or as linear as in previous years, and there may be plenty of dips for investors to buy into along the way.
Scott Wren, senior global market strategist at Wells Fargo, said he believed the market was moving towards an “opportunity zone” this year. The bank sees the S&P 500 ending the year between 6,500 and 6,700 — implying as much as a 13% increase from the index’s current levels.
In a note to clients on Wednesday, Wren recommended that investors be prepared to take advantage of any market downturn.
“And so we favor using pullbacks like these to reallocate cash and short-term instruments in increments into equity positions,” Wren wrote. “In the coming weeks and months, the potential for more attractive entry points to increase exposure could very well materialize in both equities and fixed income. We want to be ready.”
Stocks have fallen in recent weeks as investors have the option that some of Trump’s economic policies could also fuel new inflationary pressures and influence interest rates to stay high longer.
But investors were reassured by new inflation data released on Wednesday, which showed that core inflation was slightly cooler than expected in the month of December. The numbers raised investors’ hopes for a rate cut, and markets are still pricing in one or two cuts until the end of the year.
Meanwhile, stocks are still weighed down by strong fundamentals, according to Mark Hackett, lead market strategist at Nationwide. Hackett said the economy appears poised to avoid a slowdown in 2025 and that strong generation gains will continue in the broader market.
“Market corrections are a general component of the cycle, typically occurring every 18 months, and we are expecting one. “The 8% decline we are seeing for the average S&P 500 company is not disorderly or panic-driven, but rather a natural recalibration after a strong year,” Hackett wrote of the latest wave of hype after markets reached record levels in December.
“This is a textbook case where the market gets ahead of itself and corrects itself — it’s a healthy, expected, and ultimately constructive case for the long-term stability of the market,” he added.
Adam Turnquist, lead technical strategist at LPL Financial, also highlighted the positive backdrop for stocks, despite the recent “technical damage” of the S
In a note, Turnquist pointed to strong expectations for corporate earnings expansion and continued enthusiasm for AI, which could force the market higher.
Markets also expect growth-friendly policies from President-elect Donald Trump, despite the danger that some of his systems could simply lead to higher inflation and a worsening deficit, he added.
“Overall, the weight of the technical evidence suggests the recent pullback may not be over. However, the silver lining to a deeper drawdown is that it could provide a potential buying opportunity back into this bull market, as most importantly, the S&P 500 remains above its longer-term uptrend, with cyclical stocks primarily leading the way,” he wrote.
Wall Street expects another positive year for stocks in 2025, even after consecutive years of more than 20% gains for the S.