Why the S&P 500 Might Boom in 2025: Two Stocks to Consider Now
As we close out 2024, the U.S. stock market has illustrated remarkable strength and resilience. On December 6, the benchmark S&P 500 index reached an all-time high closing value of 6,090.27. This stellar performance sets a promising stage for 2025, particularly as the macroeconomic landscape shows signs of favorable conditions for stock market gains.
Positive Historical Trends Following Rate Cuts
A historical analysis by Charles Schwab states that over 14 interest rate cycles since 1929, the S&P 500 has posted positive returns 86% of the time within 12 months following the first rate cut. The index often yields negative returns primarily during recessionary periods, as seen in 2001 and 2007. However, the current economic scenario lacks the signs of recession, which augurs well for upcoming market performance.
In September 2024, the Federal Reserve initiated a new rate cut cycle, trimming benchmark interest rates by 50 basis points. Given the absence of recessionary pressures and current bullish sentiments, many analysts project significant growth for the S&P 500, with expectations from UBS for a climb to 6,400 and Oppenheimer’s chief investment strategist, John Stoltzfus, predicting a substantial leap to 7,100 in 2025.
Strategic Stock Picks for a Growing Market
With this backdrop, retail investors might consider gradually investing in high-quality stocks that are well-positioned to ride the upward trend. Here are two companies that stand out:
1. Oracle Corporation (NYSE: ORCL)
Oracle remains a dominant player in the database and cloud services sector. Despite a slight miss on earnings in its second quarter for fiscal 2025, Oracle’s integral role in the AI revolution positions it favorably for future growth. Here’s why Oracle is a compelling pick:
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Revenue Streams: Oracle’s cloud services and licensing support account for nearly 77% of its revenue, with expectations for $25 billion in cloud revenue for fiscal 2025.
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AI Integration: Major AI companies like Nvidia and OpenAI leverage Oracle’s cloud infrastructure for training generative AI models. This dynamic has spurred Oracle’s cloud business significantly.
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Iconic Infrastructure: The company recently unveiled the world’s largest supercomputer equipped with 65,000 Nvidia H200 GPUs, allowing for superior performance and efficiency, attracting substantial AI workloads.
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Scalability and Efficiency: Oracle’s modular cloud architecture means that it can scale rapidly in response to demand, simplifying deployments and reducing costs.
- Valuation Opportunities: Trading at 8.43 times its trailing twelve-month sales compared to the software sector’s median of 10.4, Oracle could see robust gains as market multiples expand.
2. MongoDB Inc. (NASDAQ: MDB)
MongoDB has established itself as a leading name in the database market, especially as businesses increasingly pivot towards cloud-native architectures. Recent fluctuations in its share price due to executive turnover have created a buying opportunity for savvy investors. Here are MongoDB’s strong points:
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Customer Growth: In its latest quarter, MongoDB added nearly 1,900 new customers, bringing its total to over 52,600. The customer base includes a growing number of high-value clients, bolstering future revenue.
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Atlas Revenue Stream: The Atlas platform, which contributes 68% of MongoDB’s total revenue, grew 26% year-over-year, reflecting its rising adoption in mission-critical business applications.
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Enterprise Focus: MongoDB is shifting resources from mid-market to large enterprises, a strategy that will likely boost revenue growth substantially over time, even if it slows customer growth temporarily.
- AI and Modernization Push: By helping businesses modernize legacy applications and leverage AI, MongoDB stands ready to capture a significant share of the growing market for AI applications requiring sophisticated data handling.
Conclusion: Don’t Miss Out
With the favorable economic conditions and the S&P 500 on an upward trajectory, now is a prudent time for investors to consider high-quality tech stocks like Oracle and MongoDB. The sizeable growth potential driven by their strategic initiatives indicates promising returns.
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Invest smartly, and stay tuned for more insights and recommendations from the Extreme Investor Network!