Market strategists at major ETF firms are optimistic about continued stock market gains in 2025, anticipating that Big Tech stocks will continue to generate solid earnings and allay valuation concerns in the near term. “We expect U.S. large-cap stocks to maintain their structural advantage over developed market (DM) stocks. U.S. companies will continue to deliver on what the market values ​​most – profitability and earnings growth, driven primarily by the technology sector And driven by so-called grand technology. In 2024, new products in the ETF industry will explode, new cryptocurrency funds will soar by tens of billions of dollars, and the trading volume of leveraged single-stock funds will increase significantly. Despite this, the two ETFs that are most popular with investors in 2024 will remain the same. The Vanguard S&P 500 ETF (VOO) and the iShares Core S&P 500 ETF (IVV) have brought in about $160 billion so far this year, according to FactSet. , a total return of 29%, despite concerns among Wall Street strategists and professional investors about market valuations and the weighting of a handful of technology stocks in the index, which Vanguard said could hurt valuations. Long-term performance, but will not necessarily hurt 2025 results. “In the short term, our analysis suggests that U.S. stocks are likely to maintain elevated valuations if economic growth and earnings remain unchanged. However, over time. Over time, the impact of growth and earnings will weaken, and valuations will eventually dominate returns in the form of ‘fundamental gravity’, which could have a faster impact on any earnings,” State Street said. Missteps, especially earnings misses by top companies, will cause concern. “A key theme for the fixed income ETF industry in 2025 is likely to be alternative strategies designed to help investors reduce some valuation risk. This could include new funds investing in less liquid assets such as private credit. Of course, look for equity alternatives Investors in commodities don’t have to look too far ahead. Vanguard’s strategy team is generally bullish on fixed income heading into the new year, in part because expectations of a Fed rate cut have greatly improved fixed income’s outlook. Risk-reward trade-off. Bonds are still coming back. Over the next decade, we expect annualized returns of 4.3% – 5.3% for U.S. and global ex-U.S. currency-hedged bonds,” Vanguard Outlook said. In 2024, broad bond funds were the most popular among investors, but some more targeted funds did make breakthroughs. For example, the Janus Henderson AAA CLO ETF (JAAA), which focuses on structured credit, has brought in more than $10 billion so far this year, according to FactSet. Kevin Khang, senior international economist at Vanguard Group, said higher yields may make stock market valuations more unpalatable, but that’s not a near-term concern. “Generally speaking, as long as the economy remains stable… then we would expect that to mean that risk assets in general will not be affected too much by yield swings,” Kang told CNBC. BlackRock Investment Institute is less bullish on bonds than Vanguard, although it does highlight some opportunities in European credit. Active Strategies BlackRock Investment Institute’s global outlook for 2025 is overweight U.S. equities, although the firm places special emphasis on active strategies and dynamic funds. The risk for investors is that such funds often cost more than underlying index products – generating more revenue for the issuer – and most active managers typically underperform in a given year. The upside is that smart managers, even carefully tuned rules-based funds, may be able to catch hot stocks or trends earlier than passive funds. For example, the iShares US Equity Factor Rotation Active ETF (DYNF) will outperform the S&P 500 in 2024. DYNF YTD mountain This factor rotation ETF is expected to outperform the S&P 500 in 2024. Exciting times: Investors looking to take a more aggressive stance may also want to bet on certain sectors or industries, Tony DeSpirito, BlackRock’s chief information officer for global fundamental equities, said earlier this month. . Jay Jacobs, head of U.S. thematic and active ETFs at BlackRock, highlighted the iShares Health Innovation Active ETF (BMED) and the iShares U.S. Manufacturing ETF (MADE) in his outlook article. Healthcare funds could benefit from lower interest rates and the impact of artificial intelligence on drug development, while manufacturing funds could be the political winners in 2024, Jacobs said. “While there may be uncertainty about the future of these Biden-era policies under a new administration, we believe additional policies may emerge after the 2024 election to further accelerate the reshoring theme,” he wrote.
Earnings growth could help ease stock market valuation concerns in 2025, ETF firm says | Real Time Headlines
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