2024 was a perfect year for overseas retail investors, especially those investing in the U.S. stock market. The annual growth rates of the Nasdaq Composite Index and the S&P 500 Index were around 30%. In contrast, the KOSPI and KOSDAQ indices ended the year down by 9.9% and 21.7%, respectively, compared to the beginning of the year. Nowadays, nine out of ten individual investors in stocks ask the same question: "Will the U.S. stock market continue to perform well in 2025?" While optimism prevails, a subtle pessimism is also emerging. We have heard opinions from both sides predicting a bull market and a bear market.[Editor's note]
The U.S. stock market is expected to remain an attractive investment destination in 2025. However, experts have noted that investors' expectations are high, and they have not adequately prepared for the possibility of underperformance in the U.S. stock market, cautioning about rising inflation rates and increased volatility in interest rates and exchange rates.
In a survey conducted by CHOSUNBIZ targeting the heads of research centers at major securities firms, experts predicted that the Standard and Poor's (S&P) 500 index, focused on large U.S. stocks, would move between 5,500 and 7,100 points.
CHOSUNBIZ asked the heads of research centers at six securities firms, including Mirae Asset, NH Investment, Samsung, KB, Shinhan Investment, and Hana, about their outlook for the U.S. stock market this year. The centers believe that despite concerns, the U.S. economy has entered a "Goldilocks" phase—neither too hot nor too cold. This analysis suggests that a low-interest rate environment and solid corporate earnings growth are favorably influencing the U.S. stock market.
Kim Dong-won, head of research at KB Securities, said, "Based on strong economic growth in the U.S., expectations for corporate profit growth are increasing, which is expected to drive stock price increases," adding that "with a solid financial condition for U.S. households, consumption will continue, and uncertainties around the election will resolve, leading to expansion in investments due to pro-business policies from the Trump administration."
However, there are concerns that widespread tariff increases and the risk of sudden policy changes could pose uncertainties in the stock market during the era of "Trump 2.0." Park Hee-chan, head of the research center at Mirae Asset Securities, pointed out that "we should be cautious of the possibility that stocks that saw excessive price increases in 2024 could experience volatile price fluctuations, and we should set our expected returns low."
◇ Trump 2.0 policies and Federal Reserve rate cuts as variables
What are the opportunity and risk factors for the U.S. stock market this year? Yoon Seok-mo, head of Samsung Securities, said, "In a situation where global uncertainties are increasing, the U.S. stock market is considered a relatively stable investment destination," noting that "the Trump administration's 'America First' stance is expected to intensify the phenomenon of the U.S. stock market showing strong performance independently." He added that "if protectionist policies stimulate a strong dollar, this relative advantage of the U.S. stock market compared to those of other countries will continue."
Yoon Chang-yong, head of the research center at Shinhan Investment Securities, believes that President Trump's trade and industrial policies could positively impact the U.S. stock market. The Trump administration has indicated policies such as universal tariffs, adjustments to the CHIPS and Science Act, and the Inflation Reduction Act, as well as promoting fossil energy while suppressing renewable energy. He also mentioned the need to monitor the extent and timing of monetary easing policies from the U.S. Federal Reserve.
On the other hand, trade conflicts and uncertainties in monetary policy are cited as risk factors. The first half of the new year is not expected to pose significant risks related to the economy, corporate performance, or interest rate cuts, but as the year progresses, there is a high possibility of increasing risks due to price hikes stemming from tariff increases and 'noise' surrounding interest rate cuts.
The upcoming debt ceiling negotiations in the first half of this year are also a major variable. The debt ceiling is the limit set by Congress on the amount of money the U.S. government can borrow. This process is expected to create liquidity expansion effects, but there are concerns that when the debt ceiling negotiations are concluded and the liquidity expansion effects diminish, it could negatively impact the stock market. Doubts regarding the Federal Reserve's ability to control inflation may also adversely affect the stock market.
◇ Attention on AI software stocks… expectations for stimulus measures in the Chinese stock market
The heads of research at major securities firms predicted that the S&P 500 would support at 5,500 points and could rise to a maximum of 7,100 points this year. While the highest forecast for the S&P 500 from the securities firms varied between 6,500 and 7,100 points, there was consensus that it would surpass its historical high.
Experts predict that AI-related stocks will continue to play a leading role in the U.S. stock market this year. However, instead of hardware companies like Nvidia, which received the most attention last year, software-related businesses are expected to take on the new leadership role for the AI theme.
Hwang Seung-taek, head of the research center at Hana Securities, emphasized, "Unlike last year, when the giant technology companies 'Magnificent 7 (M7)' drove the market up, this year we can expect a spillover effect from large-cap stocks to mid- and small-cap stocks," adding that attention should be paid to sectors like transportation, pharmaceuticals and biotechnology, and media, which are characterized by high earnings per share (EPS) growth along with semiconductors. There were also suggestions to invest in financial sectors with significant potential for performance improvement, as well as high-tech, industrial materials, and utilities.
Among the noteworthy countries outside the U.S., China was primarily mentioned. Jo Soo-hong, head of the research center at NH Investment Securities, forecasted, "At least through the first quarter, the stock market is expected to continue its upward trend focusing on growth stocks such as semiconductors and secondary batteries," adding, "If the government's stimulus measures prove less effective than market expectations, high-dividend stocks with defensive characteristics may be relatively promising starting from the second quarter."