Investing.com — In a latest word, Financial institution of America outlined 14 key classes from 2024 that buyers ought to take into accout as they head into 2025, warning that market momentum and stretched valuations might face headwinds within the 12 months forward.
Whereas this 12 months resembled the regular positive factors of 1996-97, relatively than the bubble peaks of 1998-99, dangers are mounting—from geopolitical tensions and rising debt to market fragility highlighted by the VIX.
BofA factors to alternatives in Europe, China, and Japan however cautions that volatility, commerce disputes, and macroeconomic uncertainty will form the following leg of the market cycle.
Under are the 14 classes that BofA highlighted.
1. 2024 was a robust 12 months for markets, nevertheless it may solely be the start.
2. The market’s efficiency in 2024 seemed extra just like the regular positive factors of 1996-97 than the bubble peaks of 1998-99.
3. In a bubble surroundings, market management can persist for longer than buyers can afford to remain underweight.
4. Nonetheless, the mixture of robust momentum and excessive valuations is already too stretched to keep away from a possible bust.
5. The VIX has proven that markets stay fragile, and a serious shock could also be overdue.
6. August 2024 suggests shopping for market dips and locking in volatility spikes; utilizing smarter methods like skewed delta positioning could also be key for 2025.
7. Rising debt ranges and protracted inflation imply bond vigilantes stay essentially the most seen macroeconomic tail danger.
8. Market fragility, quicker reactions, and elevated valuations counsel a repeat of the calm volatility seen in 2017 is unlikely.
9. A Trump election victory has reignited issues round tariffs, with European firms favored by greenback energy probably changing into the following commerce targets.
10. European equities stay low cost and unloved—buyers ought to be cautious about being caught quick, as fewer crowded trades imply much less volatility ache.
11. China’s outperformance over Japan in 2024 might proceed if U.S. rates of interest decline.
12. VIX choices knowledge signifies that positioning dangers out there haven’t gone away.
13. Eurozone financial institution dividends have outperformed the Nasdaq 100 for a lot of the previous 12 months; buyers might must hedge towards a unique end result in 2025.
14. The danger of sharp actions within the Japanese yen, pushed by USD/JPY volatility, might trigger instability for the Nikkei in 2025.
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