Small-Cap Stocks Outlook for 2025
As we approach the new year, experts are weighing in on the potential of small and mid-cap stocks in 2025. Global Advisors’ managing partner, Tom Lee, recently shared his thoughts on the matter, pointing out that 2025 is expected to be a good year for small and mid-cap stocks. Backed by interest rate cuts and the incoming administration, companies are likely to be expansionary and confident about mergers.
Lee further emphasized that small-cap stocks are trading at a discount with a medium P/E multiple of 10. In an interview with CNBC, he stated: "I think small caps could in the next couple of years outperform by more than 100%."
New Street Advisors CEO Delano Saporu shares similar sentiments and believes that small-cap stocks are well-positioned to outperform in 2025. The economy has shown resilience in 2024, especially with a promising outlook for businesses following Donald Trump’s win. Small-cap stocks tend to focus on the domestic market, making them less susceptible to international trade fluctuations.
A Promising Outlook for the US Stock Market
Heading into 2025, the US stock market is expected to deliver another year of impressive gains. The S&P 500 index surged more than 25% in 2024, while the tech-heavy Nasdaq 100 jumped up to 28%. The Russell 2000 index, which covers small-cap companies, soared more than 15% over the last year, and the Dow Jones U.S. Small-Cap Index has risen by 18%.
Torsten Slok, economist at Apollo Global Management (APO), released his 2025 economic outlook for the US. According to Slok, the US economy will deliver strong results with no signs of major slowing in 2025. He added that interest rates will likely stay ‘higher for longer’ despite the Fed’s current interest rate-cutting cycle.
The US economy is expected to register GDP growth of 2.2% in 2025, signaling a modest growth driven by less restrictive monetary policy, resilient consumer spending, and a steadying labor market.
Why NIO Inc. (NYSE:NIO) Is Among the Best Penny Stocks To Invest In According to Media
NIO Inc. (NYSE:NIO) is one of the leading Chinese EV makers that specializes in premium smart EVs and battery-swapping technology. The company’s financial performance has been improving, with a vehicle margin rising to 13.1% during Q3 2024 from 11% in Q3 2023.
NIO achieved a quarterly record with 61,855 vehicle deliveries in the third quarter, marking an 11.6% growth year-over-year. The NIO brand alone accounted for 61,023 deliveries, maintaining its battery electric vehicle market share of 48%.
Our Methodology
To compile our list of the best penny stocks to invest in according to media, we gathered over 50 penny stocks from financial media websites on the internet. We then selected the top 12 penny stocks that were the most widely held by hedge funds as of Q3 2024.
The list is ranked in ascending order based on the number of hedge fund holdings. Our methodology aims to identify promising penny stocks with strong growth potential and a high likelihood of outperforming the market.
Why NIO Inc. (NYSE:NIO) Ranks 7th on Our List
While we acknowledge the potential of NIO to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame.
However, if you are looking for an AI stock that is more promising than NIO but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Conclusion
The future of small-cap stocks in 2025 looks promising, with experts predicting strong growth and high returns. While NIO Inc. (NYSE:NIO) is a solid investment opportunity, we believe that AI stocks hold greater promise for delivering higher returns within a shorter time frame.
If you’re looking to invest in the best penny stocks, be sure to follow our list of top 12 penny stocks and stay informed about market trends and developments.
Recommended Reading:
- 8 Best Wide Moat Stocks to Buy Now: Discover the most promising wide moat stocks that offer a competitive advantage and high returns.
- 30 Most Important AI Stocks According to BlackRock: Learn about the top AI stocks selected by BlackRock, one of the world’s leading investment firms.
Disclosure:
None. This article is originally published at Insider Monkey.
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