The Year-End Stock Market Shuffle: What Laggards Might Bounce Back in 2025
As 2024 draws to a close, many investors begin the familiar ritual of scrutinizing their portfolios, looking for opportunities to sell off their biggest losers. This strategic practice, known as tax-loss harvesting, allows investors to realize capital losses and use them to offset capital gains, ultimately saving on taxes. But what if some of these laggards could turn around at the start of 2025?
According to Wolfe Research, there is a historical trend suggesting that the worst performers of the past year often rebound in January. Chris Senyek, Wolfe’s chief investment strategist, highlights that stocks that struggled in the latter weeks of December may just surprise us as the New Year unfolds. Data show that these stocks have historically outperformed the market by roughly 2.5 percentage points during the transition into January. However, while the January bounce is intriguing, it’s essential to note that this rebound is often short-lived; many of these stocks tend to underperform again by February and March.
Key Candidates for a Possible 2025 Rebound
Wolfe Research has identified some specific stocks that could enjoy this fleeting momentum at the beginning of the New Year:
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Dollar General (DG): Shares of Dollar General have plummeted nearly 44% in 2024 due to inflation pressures biting into their low-income customer base. Just this month, the company lowered its earnings outlook, projecting between $5.50 and $5.90 per share—a decrease from earlier estimates. Despite these challenges, Bank of America recently upgraded its rating from "underperform" to "buy," citing positive early signs from its revamped strategy. With a potential for market share gains as competing stores close, Dollar General could offer a compelling investment opportunity for those willing to take the risk as we enter 2025.
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Intel (INTC): Once a stalwart of the tech industry, Intel has faced a staggering decline of more than 60% this year, rendered sluggish amid the rise of artificial intelligence and fierce competition from companies like Nvidia, which recently replaced it in the Dow Jones Industrial Average. While the landscape appears bleak for Intel with a management shakeup and continued restructuring, savvy investors might see an opportunity: if Intel can successfully pivot its strategy to seize the AI wave in the coming years, it could turn its fortunes around.
- Other Notables: Wolfe also identified names like Dexcom, Estée Lauder, and Enphase Energy which have also faced tough years but could potentially bounce back, depending on market conditions and each company’s strategic adjustments.
The Importance of Timing Your Decisions
While January typically offers a bounce for laggards, it’s crucial to approach these potential opportunities with caution. Investors should carefully evaluate not only the historical performance of these stocks but also the broader economic environment and the specific challenges each company faces as they head into 2025.
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