What can we anticipate from the US equity market in 2025? In terms of earnings expectations, analysts think there will be continuation of 2024, where the market was dominated by the Magnificent 7. As you can see in the chart below, in the S&P500, there are two clearly distinct groups: the Mag7 where earnings are expected to accelerate, and the other 493 stocks where the picture is more grim. Valuations are another matter; out of the 7, Meta seems to be the cheaper in terms of forward P/E at 22X, and Tesla is the most expensive with 95X. The average forward P/E of the other 493 is 19X. The rotation that started in September where consumer discretionary overtook the Tech sector as the leader within the index, continues to be underway, but does not have enough weight to move the needle in terms of the overall market. The global market continues to depend on a very narrow group of stocks.
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