I’m convinced that even the most casual stock market follower will have noticed the rise and rise of the Nasdaq in 2025. As I write, we’re talking about a stunning gain of 34%. If this makes the S&P 500‘s growth of 26% feel almost pedestrian, goodness knows how it makes the FTSE 100‘s 6% increase look.
Another great year ahead?
To be fair, it’s not easy to think like a contrarian when it comes to the tech-focused US index. The Nasdaq hasn’t been on fire for 2024 alone. In 2023, it managed an even bigger 43% gain.
A lot of this has been down to the boom in interest surrounding all-things AI. But this hasn’t been the only positive catalyst. Most analysts would likely agree that the US economy is in good health, boosted by interest rate cuts from the Federal Reserve. Throw in a clear outcome to November’s election and its superlative performance is, to some extent, justified.
King Apple
Smartphone giant Apple (NASDAQ: AAPL) is one example of a stock that’s been flying. A 38% gain has pushed its market capitalisation to the cusp of $4trn. That’s impressive considering that the Cupertino-based firm’s growth rate is now much slower than some of its Magnificent Seven peers. It’s also happened despite the world’s best-known investor — Warren Buffett — selling over two-thirds of his position in the company.
Going into 2025, one could argue that there are more gains to come. Although iPhone sales may have moderated in recent years, excitement is already building about the rumoured super-slim new model, dubbed the iPhone 17 Air. Moreover, Apple still possesses stacks of net cash and a great economic moat. I know I’m not planning on switching to a competitor given the hassle involved.
Things are looking expensive
On the other hand, US shares have rarely been more expensive. Indeed, the aforementioned Buffett massively reduced his position in Apple partly because he believes that stocks are trading above their intrinsic value.
Clearly, Nasdaq’s biggest beasts must execute perfectly going forward and continue to smash analyst forecasts. However, this could prove difficult if President-elect Trump brings in his proposed tariffs as these companies are very reliant on Chinese manufacturing and supply chains.
A longer-than-expected bounce in inflation could also make a crash more likely. Let’s not forget that the index dropped by a third in 2022 when prices first began to soar.
What’s a Fool to do?
For my part, I’m actually doing very little. Most of my wealth remains tied up in US stocks via exchange-traded funds and trackers. And a good portion of this will be invested in Apple.
It will stay this way because I have no better idea than anyone else about where any index — including the Nasdaq — will go next.
Instead, I’m placing my trust in the wonder that is compound interest and compelling evidence that holding stocks for the long term tends to work out (very) well.
But as well as continuing to drip-feed money into buying more US-listed shares, I’m also looking at other parts of the world that arguably offer more value.
While facing its own share of economic hurdles, I’d say this includes our very own UK market!
