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“After years of growth stock dominance, led by the so-called ‘Magnificent Seven,’ we may see a shift in 2025. The Fed’s ‘hawkish pause’ triggered a pullback in momentum-driven names, with Tesla, in particular, facing notable profit-taking,” he wrote, referring to the Federal Reserve’s recent 25-basis-point cut in its benchmark interest rate.
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“Rotation into undervalued sectors and regions may define the year, but it is too early to make the call while the AI narrative remains intact. No one knows when the rotation will occur. I continue to emphasize diversification and watch signs for the rotation,” he said.
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“Further rate cuts from the Fed are one likely catalyst, particularly for small-cap stocks that are more reliant on borrowing at short-term rates, but small stocks have potential tax and regulatory tailwinds,” Siegel added.
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The coming months will provide a better read on the incoming Trump administration’s immigration and tariff policies, he noted.
Image: Bloomberg
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