What’s ahead for the markets in 2025
Historically, November, December and January are the best months of the year to invest. There’s an old saying in investing: “As goes January, so goes the year.”
And, I think the adage will hold true for 2025. I’m not expecting another year of 20%-plus gains in 2025, but I see more traditional returns of about 10%.
I’m tempering my expectations because market valuations are high. Stocks are simply too expensive. This to me is a warning sign.
I’m trying to prepare my investors for more normalized returns. If you’re expecting to make 25% and you make 10%, you’re going to be upset. If you expect to make 10% and you make 10%, you’ll be happy.
Where to look for value in 2025
Big pharma and biotech have taken a hit since Trump named vaccine skeptic Robert F. Kennedy Jr. to lead the U.S. Department of Health and Human Services. Amgen, Regeneron, Pfizer, Eli Lilly all look to be cheaper now. The pullback is great for investors in Canada. These are good companies with great growth opportunities.
In tech, Alphabet (formerly Google) shares have dropped in price because the Department of Justice is looking to force the sale of its Chrome browser. Stock price for Meta (Facebook) and semiconductor equipment maker Lam Research have also come down.
For a long time, Canadian bank stocks were dead money. They paid dividends, but didn’t move higher. That changed in 2024. Royal Bank and CIBC are trading at all-time highs and, right now, they are on the expensive side. For example, Royal Bank is trading around 14.5 times forward earnings, and CIBC is trading around 12.5 times forward earnings. I’d like to see them trading between nine and 11 times forward earnings, if I’m to buy. However, it is still possible to find other Canadian financial companies that are less pricey. Equitable Bank, for example, recently hit a 52-week high but trades under 10 times forward earnings.
What Canadian investors can do in 2025
Don’t base your investment decisions on the latest news making headlines or drops or surges in the market. Instead, look for good quality investments that are leaders in their field and that trade at a reasonable price. If they pay a dividend, even better. That is a recipe for success in any environment at any time.
Allan Small is the Senior Investment Advisor at the Allan Small Financial Group with iA Private Wealth (allansmall.com) and host of The Allan Small Financial Show. He is also the author of How To Profit When Investors Are Scared. He can be reached at allan@allansmall.com.
Call Me or Email Me
My approach to investing is straightforward. I study the markets, global economies and what’s happening within industries to be in a position to best help my clients find good quality investments that will help them meet their goals. I build custom portfolios for each client. I welcome you to call me at 416-332-3863 or email me at allan@allansmall.com.