US stocks are on track to closing this year on record levels but the consensus among market experts is that the S&P 500 will climb further to over 6,600 level in 2025.
Much of the strength in the benchmark index this year has been related to the tech sector.
Still, Anthony Saglimbene recommends avoiding the broader information technology stocks in 2025.
Investing $10,000 selectively in three other areas, he’s convinced, could minimise risk and offer outsized returns to investors in the coming year.
Invest in software stocks for exposure to AI in 2025
Anthony Saglimbene is the chief market strategist of Ameriprise Financial.
He continues to see artificial intelligence driving significant upside in tech stocks next year.
Instead of investing in IT names, however, he recommends parking a part of the $10,000 in software stocks, particularly ones that have so far failed to keep pace with the AI leaders.
That’s because Statista forecasts the artificial intelligence market to grow at a compound annualised rate of more than 28% through the end of this decade.
So, it’s a big enough total addressable market for the laggards to finally pick up and start to benefit in 2025, according to Saglimbene.
Financials are positioned to outperform in 2025
The Ameriprise chief market strategist also recommends spending some of the $10,000 on financial stocks in 2025.
He expects this sector to rally on the back of strong earnings growth and more accommodative regulations under Donald Trump as the President of the United States.
Anthony Saglimbene is particularly bullish on capital markets focused names within financials.
“If we have lower regulation, more IPOs, and more M&A, then those investment banks will see their profits accelerate more than insurance companies or other financials that might not perform as well,” he told clients in a recent report.
IYF – the iShares US Financials ETF is currently up some 30% versus the start of 2024.
Should you invest in bonds in 2025?
Anthony Saglimbene also recommends building a position in high-quality government as well as corporate bonds to benefit from attractive yields and diversify the investment portfolio in 2025.
In particular, he’s bullish on the five-to-seven year time frame.
For investors who prefer sticking to equities over bonds, the chief market strategist offered a 5% to 10% allocation to dividend stocks as an alternative in his research note.
“That would give you exposure to equities but do it in a less volatile, less risky way and add some income to the portfolio,” he added.
On the other hand, James Humphries of Mindset Wealth Management recommends investing about 10% of the capital in cryptocurrencies, preferrably in Bitcoin and Ethereum as well in 2025.
Bitcoin has already seen a 2.5x increase in its price this year.
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