The curtains are drawing on 2024, and investors are already looking forward to what 2025 will bring. Crypto and stock market enthusiasts had a bitter time for the most part of the year, but recent rallies have made 2024 a little bit “palatable.”
Recent reports show tech stocks, fueled by large-cap companies, have dominated Wall Street. The Nasdaq 100 Index ETF (QQQ) has soared 150% over the past five years, outpacing the Russell 2000 Index ETF (IWM), which rose only 47%.
Meanwhile, the banking sector showed promising signs of continued strength, bolstered by Wall Street’s optimistic projections. As the S&P 500 continues to climb, strategists are targeting a year-end increase, with some predicting a rise of over 5,000 by the end of 2025.
The crypto market went on a bull run after Donald Trump won the US presidential elections in November, with Bitcoin reaching a high of over $108,000. However, the market is currently in a correction phase, and investors are wondering whether the bullish trend will end this year or continue beyond 2025.
From tech stocks to the immense potential of AI’s growth, here’s how the FY2025 may play out;
Tech stocks predictions: 2025 could be the breakout year
In 2024, large-cap technology companies have led the charge on Wall Street, outpacing other sectors in both earnings and performance. Over the past five years, the Nasdaq 100 ETF (QQQ) has surged approximately 155%, far surpassing the small-cap Russell 2000 ETF (IWM), which has gained just 47%. Even the short-term outlook for tech stocks looks “encouraging.”
Source: EWF
However, analysts are now predicting that small-cap stocks will outperform their larger counterparts in 2025 for a few key reasons.
Firstly, the looming threat of President-elect Donald Trump’s tariffs could disrupt global supply chains, particularly impacting China, Mexico, and France. These tariffs would make foreign products more expensive, potentially shifting production and demand toward domestic suppliers, benefiting smaller companies.
Additionally, small-cap stocks, as represented by the Russell 2000, are poised for a breakout after a lengthy three-year base pattern. This technical setup suggests that the index could be ready to play catch-up, especially as large-cap stocks face inevitable profit-taking.
Despite a strong market performance in late 2024, analysts warn that a pullback may be due, especially given the historical pattern of corrections in even the most bullish of markets.
Moreover, regulatory changes under the new administration could have a significant impact on tech mergers and acquisitions.
With Trump-appointed Andrew Ferguson set to take the helm of the Federal Trade Commission (FTC), the environment surrounding M&As will likely become more lenient. This shift could benefit mid and small-cap companies, potentially fueling further market growth.
Crypto forecasts: Signs already in play
The crypto market is expected to experience transformative growth in 2025, building on the momentum gained in 2024. The largest crypto by market cap, Bitcoin, quickly rose above $100,000 after the November US presidential elections. Investors have witnessed a 120% year-to-date growth in the asset’s price.
Bitcoin price chart. Source: TradingView
Nations are predicted to follow El Salvador’s footsteps in embracing Bitcoin as a native currency, further solidifying its role as “digital gold.” This shift could trigger a massive increase in Bitcoin’s value, possibly pushing prices beyond $250,000 per coin.
The US President-elect Trump’s early executive order designating Bitcoin as a reserve asset will pave the way for institutional adoption. The success of Bitcoin ETFs, which saw inflows exceeding $10 billion in 2024, is also likely to drive more diverse offerings in 2025.
As large investors continue to buy into Bitcoin, the market is becoming increasingly liquid, stable, and credible, setting the stage for further growth. Expect additional ETF offerings for altcoins like Solana (SOL) and other Layer 1 tokens, which will boost institutional participation.
Furthering the trend, major banks like JPMorgan and Citi are likely to introduce their own stablecoins, offering faster settlements and competitive yields tied to government treasuries. With the potential to capture 30% of the $150 billion stablecoin market, these bank-issued stablecoins will bolster the expansion of the crypto ecosystem.
Legislative updates from Congress will also redefine securities law, expanding access to crypto assets for a broader range of investors. These changes will help bring more clarity to blockchain-based projects, potentially unlocking new growth opportunities for the entire sector.
Bank stocks: Could the S&P 500 survive inflation?
After a strong two-year run, Wall Street analysts remain optimistic about the outlook for bank stocks in 2025. Despite concerns about market valuations, strategists are predicting continued growth for major indices like the S&P 500, with targets for 2025 pointing to gains of over 9%.
Economic conditions, including robust earnings and a resilient economy, are expected to support this upward trend.
S&P 500 Index. Source: TradingView
However, some experts caution that valuations have become stretched, and investors should temper expectations for another blockbuster year. While some analysts predict a slight pullback in the second half of 2025, particularly in response to slower economic growth and inflation concerns, others remain bullish.
Wall Street firms like Oppenheimer Asset Management and Deutsche Bank expect the S&P 500 to finish the year near 7,000, driven by corporate earnings and a favorable macroeconomic backdrop under President-elect Trump’s administration.
In particular, defensive sectors like healthcare, utilities, and consumer staples are likely to outperform the market with slower growth as investors seek safer bets amid an aging bull market.
Bank stocks may face increased scrutiny and regulatory oversight, but their strong fundamentals could still provide stability and growth opportunities in the long term.
AI market: The industry will grow
Despite skepticism about AI stocks in the fiscal year 2024, the market for artificial intelligence is poised for significant growth in 2025. The market was valued at $235.27 billion in 2024 and is projected to reach $3.58 trillion by 2034, growing at a compound annual growth rate (CAGR) of 31.3%.
According to the Polaris Market Research report, by 2025, over half of enterprises are expected to be at a “mature” stage in their AI adoption, which will spur further innovation and investment in AI technologies.
However, political and regulatory factors are likely to shape the AI landscape in the coming year. President-elect Trump’s stance on big tech’s influence over content moderation, along with his plan to reverse the Biden administration’s AI executive order, could affect the trajectory of AI development.
With a focus on reducing government intervention, Trump’s policies may enable more rapid deployment of AI technologies, particularly in the private sector.
In terms of practical applications, AI is expected to enhance customer experiences by personalizing services and products, with businesses leveraging AI-driven predictive analytics to better anticipate consumers’ needs.
Generative AI, in particular, will automate responses across various customer touchpoints, though concerns about data privacy and AI’s role in personalization will require continued attention. As consumer comfort with AI grows, so too will its influence on marketing and customer relationship management.
With forecasts predicting strong growth, the AI market is likely to see a broadening of use cases, particularly in workforce transformation. AI will be increasingly integrated into work environments to support human productivity rather than replace workers.
This evolution, alongside advancements in transparency around data usage, will help build trust and accelerate AI adoption across industries.
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