With 2025 just a couple of days away, the Investing year ahead beckons. There are plenty of planned events as well as some unpredictable situations that’ll be thrown at investors in the coming year.
It’s impossible to say for certain where the stock market will go, but here are a few of my predictions that I think could happen.
UK outshining the US
In 2024, the S&P 500‘s trumped the performance of the FTSE 100. This has been down to several factors, including the strong gains from mega-cap stocks such as Nvidia. It also relates to the theme of artificial intelligence (AI) and the fact that most companies leading the charge in this area are listed in the US.
However, the average price-to-earnings ratio for the S&P 500’s 27.50. This is almost double that of the FTSE 100. Given the valuation gap created this year, I expect some investors to buy UK stocks in 2025. The pivot away from potentially overvalued US stocks to allocate money to cheap UK ideas could help the UK stock market to beat the US in 2025.
Pressure on domestic stocks
Economic data out last week showed that Q3 UK GDP growth was 0%. In other words, the economy flatlined in the three-month period. This isn’t great news for domestic UK stocks (more focused in the FTSE 250) that need a catalyst to help spark sales.
I’m cautious about the outlook for the UK economy next year. Although I’ll be happy to be proven wrong, I think if an investor’s looking to buy a stock right now, they might want to consider buying one that trades internationally. For example, HSBC (LSE:HSBA).
The global bank generates around 50% of revenue from Asia, 30% from Europe, 15% from the Americas and 5% from the rest of the world. As a result, it’s not overly impacted from what happens here in the UK.
Further, the share price has jumped 22% over the past year. Yet the price-to-earnings ratio’s only 8.34, below the general benchmark figure of 10. This could reflect good value in the stock, even with the recent rally.
As a risk, the bank’s sprawling global operations could be seen as inefficient. Earlier this month, a Bloomberg report said that management’s mulling a cost-cutting plan worth £2.36bn.
Commodity stocks could shine
I think that geopolitical tensions could run high in 2025. This includes likely elections in France and Germany, a new President in the US, a Chinese government trying to boost growth, and much more. One impact of this is likely higher precious metal prices. Safe havens such as gold and silver could outperform.
Therefore, mining stocks linked to these metals could do well next year. These companies should see the share prices increase as revenue ticks higher due to the metal prices.
Of course, my predictions could be wrong and are purely subjective in nature!
