Now that 2024 is coming to a close, it’s easy for investors to sit back and look at the past 12 months and the gains they’ve made. However, getting too comfortable in the stock market usually leads to losing track of the game just when investors need to be more focused. Starting 2025 off right is essential, as having a profitable first quarter can give investors the confidence they need to embrace more of their ideas.
For this reason, investors need to be aware of the key themes that could dominate the entire market during 2025 to align their portfolios in the right direction. These themes include fundamental and technical trends, all of which lead investors to three market areas that could deliver significant returns.
Starting with value shares, this is where the relationship between… iShares S&P 500 Value ETF NYSEARCA: Yes and iShares S&P 500 Growth ETF NYSEARCA:IVW It comes into effect, which could call for value stocks to rise soon. Then, as the economy returns to interest rate cuts, the energy sector will be the sector to watch through the Energy Sector SPDR Fund. NYSEARCA:XLE. Finally, when all these themes play out, overseas Chinese stocks favor it Alibaba Group New York Stock Exchange: Beebe and iShares MSCI China ETF Nasdaq: Walk.
Value stocks will take over in 2025
iShares S&P 500 Value ETF today
iShares S&P 500 Value ETF
(As of 01:57 PM ET)
- 52 week range
- $170.13
▼
$206.63
- Dividend yield
- 1.57%
- Assets under management
- $36.69 billion
When investors look at the spreads between value stocks and growth stocks over the past five years, it becomes clear that value stocks are at a lower cyclical level compared to growth stocks, and this usually relates to the business cycle. As the cycle resets itself, think about how the Federal Reserve (Fed) began the cycle of lowering interest rates again.
However, interest rate cuts are usually implemented when the economy is not performing well, and the Fed’s acceptance creates a level of uncertainty that may lead to market volatility. This volatility will push capital into safer stocks, such as the biggest brands in their industries.
This article includes a list of value stocks, including discounted value plays such as PepsiCo Nasdaq:Bib, Nike company New York Stock Exchange: OFAnd even ASML Holdings Nasdaq: ASML. Aligning the governor with this view could make it worth the while in the coming months of 2025.
If investing in individual stocks seems daunting to some, tracking the broader value of ETFs may be a better way to find alpha in the stock market for the coming quarters.
A buffet view is always a good view
Energy Select Sector SPDR Fund today
Power box for selected sector SPDR
(As of 01:58 PM ET)
- 52 week range
- $78.98
▼
$98.97
- Dividend yield
- 3.82%
- Assets under management
- $33.29 billion
There’s a reason Warren Buffett decided to buy up to 29% of his stock Occidental Petroleum Company New York Stock Exchange: Oxy Throughout the year: He knows that the risk-reward ratios in the sector are the best. As the economy returns to new interest rate cuts, many industries will create more demand for oil to help these stocks rise again.
The relationships described between growth stocks and value stocks have always been mirror images of oil prices. As value lags behind growth, lower oil prices accommodate easier and more flexible business environments.
The opposite is true: When value starts to outperform, it’s usually because higher oil prices make large-cap stocks with economies of scale more attractive, as they can more easily diversify costs through international operations and exposure. That’s why Wall Street analysts are seeing so much upside in stocks like… TRANSOCEAN LIMITED New York Stock Exchange: riggedbeing at the top of the oil value chain requires a consensus price target of $6.25, or a 77% upside from today’s stock price.
In case investors haven’t realized it yet, there’s a common theme about how energy stocks and value stocks could outperform in 2025, and that’s a falling dollar index. A lower dollar will also help a very different set of stocks in 2025, all around the world this time.
It’s time for Chinese stocks
iShares MSCI China ETF today
iShares MSCI China ETF
(As of 01:57 PM ET)
- 52 week range
- $35.58
▼
$59.78
- Dividend yield
- 2.26%
- Assets under management
- $5.58 billion
A falling dollar will push up the price of any stock or commodity priced in dollars, which is why bullish themes behind value and oil stocks will directly favor Chinese stocks. Historically, a falling dollar has been a catalyst for stocks like Alibaba and the broader China ETF.
However, this time, other major players in the Chinese economy could also take off, e.g New Company New York Stock Exchange: New and BDD Holding Company Nasdaq: BDDwhich could fall into the value category of China’s stock market.
Knowing this, it should come as no surprise to see analysts from Barclays affirming an overweight rating on Alibaba stock as of November 2024, and setting a stock price target of $130 to call for an upside of up to 52% from where the stock is trading today.
Before you consider the iShares MSCI China ETF, you’ll want to hear this.
MarketBeat tracks the highest-rated and best-performing research analysts on Wall Street and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are whispering to its clients to buy now before the broader market catches up… and the iShares MSCI China ETF was not on the list.
While the iShares MSCI China ETF currently has a “Hold” rating among analysts, highly rated analysts believe these five stocks are better buys.
View the five stocks here
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