The Other 493 Stocks You Should Invest In
Whether you follow financial markets intently, passively, or not at all — the term “Magnificent Seven” may be familiar. Several of the companies associated with this phrase - Apple, Amazon, Microsoft, Meta (Facebook), Alphabet (Google), Tesla, and Nvidia - are ubiquitous in everyday life and absorb much of the limelight amongst S&P 500 constituents (the 500 largest publicly traded companies in the United States). The U.S. stock market's exceptional performance in 2024 has left many investors both optimistic and reflective. Despite challenges such as persistently high inflation and election-year uncertainty, the S&P 500 surged by 25%. Much of this success can be attributed to those "Magnificent Seven" tech giants and their dominance in the field of Artificial Intelligence (AI). AI fueled the 2024 stock market, however 2025 may offer many compelling opportunities for other areas as well. 2024: The Year of the AI Investment Cycle
The 2024 rally was largely driven by an AI tech boom. Companies heavily investing in AI technologies dominated headlines and market returns. The impact of AI on market performance cannot be overstated as the sectors closely tied to AI advancements accounted for 56.5% of the S&P 500's total return. Without these sectors, the index’s return would have been a more modest 11%. This underscores the increasing dominance of technology in driving market growth. While tech dominated, other sectors also contributed meaningfully: Financials contributed 15% to the S&P 500 return, benefitting from resilient bank earnings and greater investor confidence in financial innovation
Consumer Discretionary added 11% to the index’s return despite high prices that typically curb this sector
Looking Forward
As we enter 2025, there are reasons for both optimism and caution. While more tech gains are likely, replicating the meteoric rises of 2024 may prove challenging. In navigating dynamic markets, consider these always important tenants: Diversify: While the "Magnificent Seven" have delivered exceptional returns, concentrated portfolios carry risks. Diversify across sectors and asset classes to balance returns and stability.
Prepare for Volatility: Maintain a long-term perspective and avoid knee-jerk reactions to short-term fluctuations.
Focus on Quality Investments: Companies with strong fundamentals, robust cash flows, and innovative strategies are better positioned to weather economic uncertainty.
The 2024 stock market rally underscored the transformative power of AI and the resilience of leading tech companies. While inflation and economic uncertainty present challenges, 2025 offers compelling opportunities for investors who adopt a strategic, diversified approach. AI continues to drive innovation so we should expect its investment enthusiasm to persist. It may also create opportunities in under-appreciated sectors like healthcare, renewable energy, and industrials as AI-related advancements extend into these fields. The growing global adoption of AI technologies could also enhance international markets' role, stressing the importance of diversification abroad as well. As your financial professional, I’m here to guide you through these markets, align your investments with your goals, and help you seize the opportunities ahead. Let’s make 2025 another year of growth and success together.