Wolfe Research strategists maintain that growth stocks will outperform the broader market by 2025, identifying stocks expected to see at least a 25% revenue increase this year. They favor cyclical and growth stocks over high-quality and value stocks, and prefer small to mid-cap stocks over large caps. Key tech giants like Apple (AAPL, Financial), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Meta (META), and Tesla (TSLA) are predicted to outshine other S&P 500 components.
Chris Senyek, Wolfe Research's Chief Investment Strategist, suggests robust fundamentals and increased AI spending will drive these tech giants' performance. Additionally, sectors such as Information Technology (XLK), Energy (XLE), and Communication Services (XLC) are expected to see revenue growth of 46%, 32%, and 26% respectively by 2025. In contrast, the Consumer Staples sector (XLP) is not anticipated to experience significant growth, with Utilities and Materials sectors projected to grow by only 6% and 7% respectively.
The strategists also predict a 2.5% real GDP growth rate for the U.S. in 2025 and 2026, slightly higher than Wall Street economists' average forecast of 2% to 2.1%. They believe that unless the U.S. faces a recession or AI spending expectations change drastically, market concentration will remain high. Economic surprises are expected to continue, driven by increased consumer and business confidence, deregulation, and potential tax cuts starting from 2026.
