2025 Could Be a Good Year for the Savvy Investor

Approach markets with a healthy dose of caution but check out 'SGX Magnificent 7'

- Ven Sreenivasan

Okay, so there was no Santa Claus rally coming into the new year. The bloke in the red outfit went AWOL (absent without official leave, in military parlance).

Since 1950, the S&P 500 has generated an average return of 1.3 per cent during the seven days between Christmas and New Year, widely outpacing the market's average seven-day return of 0.3 per cent, according to LPL Research.

But fret not. There are 50 more weeks ahead and if US President-elect Donald Trump's administration unleashes market-friendly policies and the Federal Reserve continues cutting interest rates, there could be quite a run-up in 2025.

Mr Ben Powell, chief strategist at BlackRock Investment Institute, is upbeat on prospects for 2025, citing mega forces that could provide more opportunities for investors. Two areas in particular are recipients of artificial intelligence (AI) capital expenditure and the potential for private capital participation in global infrastructure spending.

"We are quite bullish on the investment outlook, despite the uncertainties ahead," he said. "But unlike the post-Covid-19 years when one could be bullish on virtually everything, investors now need to take a more nuanced, granular and proactive approach to investing, given the potential volatility."

Although Wall Street had a bumpy ride last week, the outlook for 2025 remains sanguine. Meanwhile, the Straits Times Index (STI) has shown resilience.

The Singapore stock market has had an extraordinary 2024. Driven largely by financial stocks, the STI surged 17 per cent in 2024, reaching a new all-time high at one point in November.

The standout performers included Yangzijiang Shipbuilding, which soared 116 per cent; DBS Group, up 53 per cent; and OCBC Bank, ahead 37 per cent.

The STI delivered a 4.9 per cent dividend yield. Other market segments such as Singapore-listed real estate investment trusts, or S-Reits, and mid-caps generated even higher yields.