As we enter the new year, investors are looking ahead to what’s in store for small-cap stocks in 2025. According to Global Advisors’ managing partner, Tom Lee, 2025 is shaping up to be a good year for small and mid-cap stocks. With interest rate cuts and the incoming administration on the horizon, companies are expected to become more expansionary and confident in their ability to merge with others.
Why Small-Cap Stocks Are Poised to Outperform
Tom Lee’s prediction that small-cap stocks will outperform by over 100% in the next couple of years is supported by New Street Advisors CEO Delano Saporu. Saporu believes that small-cap stocks are well-positioned to outperform in 2025 due to their domestic focus and limited exposure to international trade.
The Economy’s Resilience and Small-Cap Stocks
The economy has shown resilience in 2024, particularly with the recovery in the last quarter signaling a promising outlook for businesses. Donald Trump’s win has already driven significant gains in small-cap stocks amid growing enthusiasm around potential easing of regulations on businesses.
Why Small-Cap Stocks Are Less Vulnerable to Tariff Policies
Small-cap stocks are conventionally focused on the domestic market, with less exposure to international trade compared to large-cap counterparts. Therefore, Trump’s tariff policies will not have a major impact on small-cap stocks compared to large-cap stocks.
US Stock Market Outlook for 2025
Heading into 2025, the US stock market is expected to deliver a second consecutive 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%.
Economic Outlook for 2025
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. Slok added that interest rates will likely stay ‘higher for longer’ despite the Fed’s current interest rate-cutting cycle.
US Economy Expected to Register GDP Growth of 2.2% in 2025
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
A fleet of cars plugged into a fleet-scale charging station, highlighting the company’s advanced fleet energy management solutions.
Our Methodology
To compile our list of the best penny stocks to invest in according to the 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 holders.
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.
Why AI Stocks Hold Greater Promise
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.
Disclosure
None. This article is originally published at Insider Monkey.
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