Wall Street: U.S. stocks are very expensive in 2025, but you have no choice

The return of "TINA."

In a recent outlook report, major Wall Street firms generally expect that U.S. stocks will maintain a leading return rate level in 2025, with the S&P and other large-cap stock indices expected to achieve over 25% growth for the second consecutive year.

Analysts say that despite the high valuations of leading companies in the industry and a series of policy combinations from the Trump administration still bringing uncertainty to the stock market, strong economic growth and the AI revolution are likely to continue supporting the rise of the stock market.

Albert Edwards, a strategist at Societe Generale, stated that "TINA" is about to return, meaning "There Is No Alternative to owning equities."

JP Morgan's Lakos-Bujas mentioned in the report:

"Due to policy changes brought about by the 2025 government transition, the exceptionalism of the U.S. may face turbulence and increased volatility, but the opportunities may outweigh the risks."

High valuations, but high earnings expectations

Currently, U.S. stocks remain the most expensive in the world. FactSet data shows that the market capitalization of U.S. stocks now accounts for over 50% of the global stock market value, the highest level since the end of 2001.

At the same time, most bullish Wall Street analysts believe that excellent profitability may continue to drive up stock prices and justify the recent multiplicative valuation expansion.

The positive outlook for U.S. economic growth also supports this argument. The latest data shows that driven by strong consumption, the U.S. GDP growth rate in the third quarter reached 2.8% quarter-on-quarter, a pace higher than that of other developed markets.

The UBS team stated that compared to foreign households, American households have more net assets allocated to stocks, which helps amplify the "wealth effect" on the economy during market upswings.

The bank added that if global economic growth slows, the attractiveness of U.S. stocks to foreign capital will further increase, and they are expected to continue benefiting from this.

Considering various factors, despite being expensive, U.S. stocks may still become the "optimal choice" in investors' minds.

David Kelly's team, Chief Global Strategist at JP Morgan Asset Management, stated that despite having to acknowledge the low valuations and attractiveness of overseas markets, there is still no "alternative" to U.S. stocks:

"The lack of quality substitutes for U.S. stocks remains a reality."

Tech stocks remain the "profit pivot"

Analysts believe that tech stocks will continue to be the main profit driver for U.S. stocks.

Barclays U.S. stock strategist Venu Krishna told MarketWatch that the profit pivot still mainly comes from tech giants and is expanding:

"The earnings expectations for U.S. stocks are quite healthy. The profitability pivot remains concentrated in large tech companies, but in terms of direction, other parts of the market are moving in the right direction, although at a much slower pace than expected."Regarding the recent surge in artificial intelligence, Krishna believes that although there is still significant uncertainty regarding the return on investment in AI for companies, over time, the productivity of AI technology will gradually improve, helping to increase corporate profits.

Additionally, some analysts believe that Trump's 2.0 tendency towards corporate tax cuts and deregulation may further enhance corporate profits while boosting the economy through increased deficit spending