Investment Outlooks for 2025: A Conversation with Allspring Global Investments’ Bryant VanCronkhite
As we approach the midpoint of 2024, investors are eagerly awaiting the market’s next move. To gain insights into the top investment outlooks and biggest market risks for 2025, I sat down with Bryant VanCronkhite, Senior Portfolio Manager at Allspring Global Investments.
Warning Signs in the Market
VanCronkhite began by cautioning against investor complacency in 2025, particularly when it comes to the so-called "Magnificent Seven" tech stocks. While acknowledging their impressive returns, he notes that this may be a risk due to the market’s broadening out. "That’s a risk because the market is broadening out right now," VanCronkhite explains.
The Magnificent Seven: A Risky Investment?
The Magnificent Seven refers to a group of seven tech stocks that have consistently performed well in recent years. These companies include Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), Meta Platforms (META), Tesla (TSLA), and NVIDIA (NVDA). While these stocks have been top performers, VanCronkhite argues that their valuations may be overextended compared to the broader market.
"We don’t want to pay as much of a multiple for companies that are growing slower, which is the Mag Seven, compared to the broader market, which is the Russell 2000 (^RUT) and the Russell mid-cap stocks," he explains. This means that investors may need to reassess their investment strategy in these stocks.
A Word of Caution: Rotate Down
Rather than selling or abandoning these stocks entirely, VanCronkhite advises investors to be strategic. "That doesn’t mean sell it; it doesn’t mean leave. Just be careful about staying too long. Rotate down," he tells Yahoo Finance.
This approach involves gradually reducing exposure to the Magnificent Seven stocks and shifting investments into other sectors that may offer more attractive valuations.
Sector Opportunities in 2025
When asked about sector opportunities for 2025, VanCronkhite expresses caution about the banking sector, describing it as "nerve-racking" despite market optimism. However, he points to materials and healthcare as sectors with attractive valuations that could outperform in 2025.
Materials: A Bright Spot in 2025
The materials sector has been a standout performer in recent years, driven by strong demand for commodities such as copper, iron ore, and lithium. VanCronkhite believes that this trend will continue in 2025, with companies such as BHP Group (BHP), Rio Tinto (RIO), and Vale S.A. (VALE) likely to benefit from growing global demand.
Healthcare: A Sector on the Rise
The healthcare sector has also been gaining traction in recent years, driven by advances in biotechnology and pharmaceuticals. VanCronkhite points to companies such as Johnson & Johnson (JNJ), Pfizer (PFE), and UnitedHealth Group (UNH) as potential beneficiaries of this trend.
Conclusion: A Strategic Approach in 2025
As we look ahead to 2025, it’s clear that investors will need to be strategic in their investment approach. With the market broadening out and valuations becoming increasingly stretched, VanCronkhite advises caution when it comes to the Magnificent Seven tech stocks.
Instead, he recommends focusing on sectors with attractive valuations, such as materials and healthcare. By rotating down from overvalued stocks and shifting into these sectors, investors may be able to capture growth opportunities while minimizing risk.
Additional Insights from Bryant VanCronkhite
To gain further insights into VanCronkhite’s investment outlooks for 2025, I asked him to share some additional thoughts on the market:
- What are the biggest risks facing investors in 2025?
VanCronkhite warns of investor complacency and overvaluation in certain sectors. He also notes that rising interest rates could impact stock prices.
- Which sectors do you think will outperform in 2025?
VanCronkhite points to materials and healthcare as sectors with attractive valuations that could outperform in 2025.
- What advice would you give to investors looking to diversify their portfolios in 2025?
VanCronkhite advises investors to be strategic when it comes to rotating down from overvalued stocks and shifting into other sectors.
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This article was written by Angel Smith.