| More Articles | Free Reports | Premium Services By Louis Navellier, Editor, Growth Investor What’s ahead in 2025? I like to start each year by looking ahead over the next 12 months and seeing if I can spot investable trends. Think of it as a “road map” for what’s to come in the new year. As investors we’ll want to keep on the right side of these trends. That’s how we’ll score our biggest wins. With that in mind, here are my five big-picture predictions for the year ahead. Prediction No. 1 – Central Banks Will Continue to Slash Rates Last year, the European Central Bank (ECB) slashed interest rates by a quarter of a percentage point four times. And I expect more rate cuts to come in the European Union (EU) this year. The economy there is floundering. The ECB expects 1.1% annual GDP growth this year. That’s down from the previous estimate of 1.3%. So, the ECB will need more cuts in 2025 to try to boost growth. According to a Bloomberg survey, interest rates in the EU will fall from 3%, where they stand today, to 2% by June 2025. This is good news for the United States. Falling interest rates in the EU should trigger a rally in U.S. Treasury bonds, as investors seek out higher yields. Bond prices and bond yields move in opposite directions. So, over time, this will push down Treasury yields and encourage the Fed to further cut its key lending rate. Remember, the Fed never fights market rates. The one stumbling block is inflation. Last November, it started to tick higher. If inflation keeps climbing, the trend toward lower rates in the U.S. could be interrupted. Prediction No. 2 – U.S. Remains Economic Growth Engine Global economic growth has tapped the brakes, especially in Europe. Its two largest economies, Germany and France, are on the verge of a recession. There’s also political unrest to contend with. Germany has an election scheduled for February. It’s likely, we’ll see a new leader there as a result Meanwhile, French president Emmanuel Macron’s party has a minority in parliament. And Marine Le Pen’s National Rally Party continues to undermine Macron’s powerbase. If the chaos in Europe persists, don’t be surprised if the euro “breaks a buck” and reaches parity with the U.S. dollar. The good news is we don’t have political chaos or recession fears in the U.S. So, we’ll remain the economic growth engine of the world. There are a few key reasons why the U.S. economy continues to expand… - Better demographics: Much of the world has experienced a population decline, except for the U.S., Brazil, and India. The U.S. still has pro-family regions, like the South and Mountain West, so household formation continues to grow.
- Quick assimilation of immigrants: The U.S. assimilates its immigrants – both legal and illegal – more effectively, which also helps boost household formation.
- Competitive states: America’s 50 states compete with each other and are economic laboratories that can also stimulate economic growth. Florida, South Carolina, South Dakota, Tennessee, and Texas have all demonstrated this.
It’s also important to note that one of Trump 2.0’s first agenda items is to end the manufacturing recession in the U.S. Manufacturing has been in a recession for 24 of the past 25 months, according to the Institute of Supply Management (ISM). Once the manufacturing sector starts to grow again, 4% annual GDP growth is possible. Another agenda item is to end the senseless wars in the Middle East and Ukraine. If Trump 2.0 can do this, the world would benefit from a “peace dividend” like the one we experienced when Bill Clinton was president. And if there’s peace in the world, then 5% annual GDP growth is possible. Overall, if the U.S. is firing on all cylinders in 2025, then 4% to 5% annual GDP growth is a real possibility. Prediction No. 3 – Trump 2.0 Will Boost the Oil and Gas Industry Trump 2.0 is a godsend for the natural gas industry. When Trump takes office in January, he’ll lift the ban on drilling federal lands by Executive Order on day one And President Biden’s attempt to squelch liquified natural gas (LNG) expansion will be over. The Environmental Protection Agency’s (EPA) demand that all new natural-gas-turbine power plants sequester carbon dioxide will also be lifted. This will trigger a boom in new natural gas-fired electric plants. So, the U.S. will now be able to double its utility grid to better meet the rising demand for artificial intelligence data centers. Regarding oil, production should also increase under Trump 2.0. But weak global demand due to sputtering economies in Europe and Asia will likely keep oil prices in check. I expect crude oil prices to range from $58 to $80 a barrel in 2025. Prediction No. 4 – Earnings Will Hit the Gas The earnings environment improved immensely in 2024. 2025 will be even better. FactSet projects that the S&P 500 will achieve average fourth-quarter earnings of 11.8% and average full-year 2024 earnings of 9.5%. After that, earnings growth is expected to surge. The S&P 500 is expected to achieve 15% average earnings growth in 2025. And earnings momentum in each quarter of fiscal year 2025 is set to exceed the S&P 500’s average earnings growth in all of 2024. So, we remain in a fundamentally focused stock market. I’m especially excited about stocks with positive analyst earnings revisions, robust operating margin expansion, and accelerating earnings and sales momentum. Prediction No. 5 – The Third Stage of the AI Revolution Begins The first stage of AI development was all about model training. OpenAI and other AI companies needed to gather billions of data points and then run it all through increasingly large systems to create ChatGPT and other AI chatbots. Model sizes have historically grown at an exponential rate to overcome diminishing rates of performance. And every AI chatbot developer has been locked in an arms race to create the most data-intensive model. That’s why Nvidia, Super Micro Computer, and other firms that specialize in providing the top-of-the-line computing power needed to train these ever-growing models have been on a tear. The second stage of the AI Revolution will focus on software-focused firms using AI and/or delving into quantum computing to create remarkable innovations. These are the companies that push the envelope of what’s possible, upending their businesses along the way. The third stage of the AI Revolution is where we learn to work with AI chatbots… seek alternative methods to push AI further… and where the future pace of development will depend on human-and-machine ingenuity. The winners here will be what I call “AI Appliers”, the companies smart enough to apply imperfect AI technologies to an equally imperfect world. These are the firms that recognize AI’s limitations and create innovative solutions to overcome them. I expect the third stage will begin in 2025 – and my InvestorPlace colleagues Luke Lango and Eric Fry agree. It’s why we’ve teamed up to create a portfolio of seven stocks we believe will lead this next stage of AI development. These AI Appliers are… - Working around the limitations of AI chatbots – using a clever combination of human ingenuity and software to supplement AI shortcomings
- Exploring the next generation of AI technologies where silicon chips meet bioengineering
- And helping the world redefine what is possible in a world of artificial intelligence
We believe these firms will help investors prepare financially for a world increasingly dominated by computers that are smarter than the average person (though still far from perfect). To learn more about our AI Appliers portfolio and how to access it, watch our special broadcast here. Sincerely, | 
No comments:
Post a Comment