Year-end review of the US stock market: Seven giants continue to make great strides, investors prepare for Trump 2.0

In 2024, the US stock market saw a significant increase for the second consecutive year, driven by the artificial intelligence (AI) boom, the Federal Reserve's interest rate cuts, and strong economic growth, leading to continuous inflow of international funds into the US, with the three major indexes continuously breaking new historical highs. As of the closing on Friday (December 27), the S&P 500 index has risen by over 25% for the year, while the tech-heavy Nasdaq Composite index has shown a stronger upward trend, with a 31% increase for the year. In comparison, the Dow Jones Industrial Average has seen a more modest increase of 14%. As we near 2025, global markets may increasingly be influenced by US trends, with a series of policies expected upon Trump's return likely to stir up significant waves, and the Federal Reserve's indications of slowing down the pace of interest rate cuts have already disrupted the market. Looking back on the market in 2024, US stocks started the year strong, with the S&P 500 index soaring 10% in the first quarter due to the resilience of the US economy, easing inflationary pressures, improvements in corporate profits, and expectations of rate cuts by the Fed. The enthusiasm for artificial intelligence among investors also played a significant role in driving up large tech companies and related stocks. This momentum continued into the second quarter, with market volatility reaching its lowest levels since January 2020 by the end of June. The AI boom once again drove significant growth in the information technology and communication services sectors, but overall gains were suppressed by the hawkish Fed. In July and August, US stocks faced a series of significant volatilities as weak employment, manufacturing, and construction data triggered sell-offs in the market, casting a shadow of economic recession over Wall Street. By September, the Fed made a significant 50 basis point rate cut, initiating a new round of monetary easing, reigniting hopes that the US could avoid a recession, and US stocks set sail once again. After November, with Trump winning the US presidential election in a sweeping fashion, the "Trump trade" became the focus of the market, with the S&P 500 index posting its strongest monthly performance of the year in November. Investors were optimistic about the prospects of the next administration lowering taxes and reducing regulations, but were concerned about policies such as tariffs and immigration. The "Big Seven" strengthening further Overall, the trend of US stocks in 2024 became more extreme, with the "big seven" tech stocks accounting for about one-third of the S&P 500 index, up from about one-fourth at the end of 2023. The big seven consist of Apple Inc., Microsoft Corporation, Amazon.com, Alphabet, Meta, Tesla, Inc., and NVIDIA Corporation. Driven by the AI boom, NVIDIA Corporation's stock price rose by 239% last year and surged by 177% this year, increasing its market value by $2.2 trillion. NVIDIA Corporation remains the biggest beneficiary of the AI boom, as large cloud providers and internet companies continue to purchase its high-end chips. It is worth mentioning that Tesla, Inc. had been lagging behind before November, making the concept of the big seven seem somewhat outdated. However, after Trump won the election, Tesla, Inc.'s stock price doubled. As Trump's biggest donor, Musk's wealth skyrocketed, becoming the first person in the world with a fortune exceeding $400 billion, reaching the milestone of the world's richest. Apple Inc. has regained the title of the world's most valuable company and is expected to become the first company with a market value exceeding $4 trillion. This significant growth is mainly due to investors' positive response to the company's progress in AI, with AI capabilities seen as key to revitalizing recent sluggish iPhone sales. Sam Stovall, Chief Investment Strategist at CFRA Research, stated that due to earnings growth, tech stocks have been seen by investors as a new defensive sector, and Apple Inc., as one of the leaders, reaching a market value of $4 trillion will further solidify its position as a market leader and innovator. However, Warren Buffett is continuing to sell Apple Inc. stocks, starting in the fourth quarter of 2023, and accelerating sales in the second quarter of 2024. After further reducing his holdings by a quarter, Buffett currently owns about 300 million shares of Apple Inc, a decrease of 67.2% from the end of the third quarter of last year. Weight loss drug market competition intensifies The hype around weight loss drugs remains hot, but with the rise of competitors, the stock prices of the two market leaders, Lirium and Novo Nordisk A/S Sponsored ADR Class B, have continued to fall in the second half of the year. Next year, there may be more information to help people more clearly identify potential winners and losers in the weight loss drug market. Goldman Sachs Group, Inc. estimates that by 2030, the weight loss drug market could reach $130 billion. The demand for Zepbound in the market is so high that Lirium has raised its annual revenue expectations twice this year and is also investing in expanding its production capacity. However, in the second half of the year, due to lower-than-expected sales of Zepbound in the US, Lirium significantly lowered its full-year profit guidance and revenue guidance ceiling for 2024. Investors are now focusing on more data on its oral weight loss drug, orforglipron. The situation for Novo Nordisk A/S Sponsored ADR Class B is similar to Lirium, as on December 20, due to disappointing data on the highly anticipated "next-generation weight loss drug CagriSema," Novo Nordisk A/S Sponsored ADR.Class B stock price plunges nearly 20% in a single day.Analysts are currently focusing on the latest developments of Novo Nordisk A/S Sponsored ADR Class B oral drug Amycretin, expected to be released in the first quarter of next year. In addition to the "weight loss drug duo," Viking Therapeutics is also a market focus. Earlier this year, the company's oral weight loss drug showed positive results in clinical trials, with good weight loss effects and low side effects, leading to a nearly 120% increase in its stock price this year. Amgen Inc.'s stock price reached a historic high in September, but plummeted afterwards as its experimental weight loss injection drug, MariTide, did not significantly outperform competitors in clinical trials and showed high gastrointestinal side effects. Despite this, Amgen still believes that its drug has advantages over existing drugs, and investors will be watching for further updates next year. Roche plans to accelerate the development of its weight loss drugs. Last year, the company acquired biotechnology company Carmot for up to $3.1 billion and acquired approximately 7 drugs from Carmot, some of which are in early stages of development. Cryptocurrency Concept Dominates Since the US election day, Bitcoin has become one of the hottest investments in the market. President-elect Trump has promised to be the "cryptocurrency president" and to build the "most bitcoin-friendly government ever," leading to continuous price surges of Bitcoin and driving up stocks of cryptocurrency-related companies. MicroStrategy has seen a 422% increase this year, Coinbase by 53%, and Robinhood by 206%. MicroStrategy, as the world's largest investor in cryptocurrency assets, with a market value close to $90 billion, is now the largest corporate holder of cryptocurrency. The company has purchased over 440,000 bitcoins, using their rising stock price to sell stocks, finance acquisitions, and buy more bitcoins. Cryptocurrency is one of the primary growth engines of Robinhood, allowing retail investors to easily purchase cryptocurrencies and stocks on their app. Robinhood CEO Vlad Tenev said at an investor event in November that cryptocurrency is not just an investment, but a "disruptive technology that will change the underlying infrastructure of payments, loans, and various tradable assets." Outlook At this time of year, top Wall Street strategists forecast the future and tell investors their predictions for the US stock market. With the S&P 500 index showing double-digit percentage gains this year, the difficulty of predicting the trend for 2025 may be particularly high. Investors are concerned about whether the US stock market can continue to rise given its already high valuation. Nevertheless, Wall Street forecasters are becoming increasingly optimistic about 2025, with many publishing their predictions for the S&P 500 index. Most forecasts anticipate that the US stock market will maintain its unstoppable rise next year. A recent survey by MarketWatch of Wall Street investment banks and research firms showed that their median target for the S&P 500 index by the end of 2025 is 6600 points, indicating a 10% increase from its current level of 5970 points. Some of the most optimistic forecasts predict that the S&P 500 index will close at around 7000 points next year. This includes forecasts from Oppenheimer Asset Management, Deutsche Bank Aktiengesellschaft, and Yardeni Research, supported to some extent by the resilience of the US economy and the potential growth in corporate profits during Trump's second term. Even the most pessimistic forecasts from Wall Street investment banks suggest that the S&P 500 index will end next year at 6400 points, a 7% increase from its current level. The current price-to-earnings ratio of the US stock market is 22.5 times, with record-high expected profits. In comparison, the expected price-to-earnings ratio in other regions of the world is less than 14 times, with expected profits still lower than the forecasted values in 2008. Both Goldman Sachs Group, Inc. and Bank of America are concerned about overvalued stocks and recommend investors to buy stocks with lower valuations, despite their expectations of an overall market increase next year. Trump 2.0 and Federal Reserve Policy US investors are currently preparing for a series of changes in 2025, from tariffs, deregulation to immigration policies, which will impact the market as President-elect Trump returns to the White House, requiring investors to adjust their portfolios. Investors generally expect that the US economy will continue to be "exceptional" in the new year, as robust consumer spending and a resilient job market make the foundation of US economic growth stronger than many developed countries. The US economy is expected to receive further support from possible tax reform, including a reduction in corporate tax rates. Such tax cuts may boost corporate profits and market sentiment. Trump has always viewed the stock market as a barometer of his performance, but the current valuation of US stocks is extremely high. Therefore, even achieving average historical performance in the stock market in the next four years would be a daunting task for him. Another focus of the market is the speed and magnitude of Federal Reserve interest rate cuts. The Fed continued to cut interest rates by 25 basis points this month, but hinted at slowing the pace of further cuts, in part because they expect price pressures to be more stubborn than previously expected. Most Fed officials now expect to cut rates only twice by the end of 2025, with two more cuts in 2026. Back in September, most officials expected at least four rate cuts by 2025. Although Trump has long expressed his desire for lower rates, he has not commented on the Fed's recent actions. Some of the people advising Trump on economic issues do not want the Fed to continue cutting rates, as they realize that the battle against inflation is far from over.Complete victory.This article is from "Cailianshe", written by Niu Zhanlin, edited by GMTEight: Chen Qiuda.