Bell Potter's top stock picks for 2025

Global equities continued their upward trajectory in 2024, driven by a robust global economy, a favourable interest rate environment, AI, and positive market sentiment in the wake of the US election.

Returns were primarily driven by a continued expansion in valuations, particularly in the US and Australia, contributing substantially to overall returns. This has now taken valuations to elevated levels going into 2025.

While the S&P 500 grew earnings at a strong rate over the course of 2024, the ASX 200 returns were solely driven by a re-rate in the prices portion of P/E valuations, with earnings going backwards at the index level.

Growth and quality have been winners as rate cuts, AI hype, and narrowing earnings growth across sectors supported these factors. Small caps and value have struggled with the macro going against them. The Magnificent Seven (Apple, Microsoft, Nvidia, Google, Meta, Amazon and Tesla) played an outsized role in driving US market gains. These stocks are behemoths in the information technology, communication services, and consumer discretionary sectors, leading to a concentrated rally and limited breadth of outperformance.

2024 ASX sector performance

Mirroring the US market, ASX tech stocks were standout performers in 2024. Cyclical sectors also performed well. Financials, particularly banks, experienced a surge in valuations despite minimal earnings growth, making the sector - led by CBA - expensive. A resilient consumer and strong performance from Wesfarmers bolstered consumer discretionary.

Real Estate outperformed, driven by Goodman Group’s strategic shift towards data centres, a sector benefiting from the positive sentiment surrounding AI. Conversely, resources lagged due to weaker commodity prices and China’s stimulus underwhelming.

Valuations have done most of the heavy lifting in 2024, but we believe that earnings will do the heavy lifting in 2025 in terms of returns. The earnings outlook is still positive for global equities.

Bell Potter analysts' top picks for 2025

As 2024 draws to a close, our analysts have compiled their highest conviction stock picks for the year ahead.

The report attached to this wire includes our analysts' views on the outlook across eleven sectors and their top picks in each sector.

Click on the button below to download the report.