BlackRock executive outlines ‘quality’ playbook for the 2025 stock market [Video]

Listen and subscribe to Opening Bid on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.

Investors saw double-digit returns in the major stock market indexes in 2024, marking a successful year with serious growth in many sectors.

But with a new administration beginning and the US entering the third year of a bull market, many investors are considering the best way to prepare their portfolios for potential shifts in 2025.

Gargi Chaudhuri, chief investment and portfolio strategist for the Americas at BlackRock, spoke with Brian Sozzi on Yahoo Finance’s Opening Bid about her outlook for the 2025 market and shared her predictions for what will drive stocks under the incoming administration.

“Broadly, the theme that we’re talking about in our year-ahead outlook is one of quality,” Chaudhuri said (see video above or listen below). “It is the intersection we call of quality and growth with an eye on valuations.”

Chaudhuri suggested investors pay attention to the way micro-narratives, such as the interest rate environment and tariffs, shift the market.

Many economists and Federal Reserve officials see more “upside risks” to inflation from Trump’s proposed trade and immigration policies, which could complicate the Fed’s path to reaching its 2% inflation goal.

“I think the Fed is very clear that they’re at a pause right now,” Chaudhuri said. “But maybe in March or June, is it likely that they can still cut one or two more times? I think so based on the data at hand so far. Now, obviously, if inflation accelerates from here or if the growth meaningfully continues to accelerate from here, it’s going to be hard for the Fed to make a cut.”

Chaudhuri emphasized that active management or dynamic factor rotation funds may be strategies worth considering to take advantage of changes in policy.

“Obviously our dynamic factor rotation fund is focused on momentum and focused on quality with some eye on value,” Chaudhuri explained, “but as the micro-narratives or even the macro-narratives shift, that can rotate on your behalf, and we think in 2025 that’s going to be really important.”

On a sector basis, Technology (XLK) and Communications Services (XLC) companies have been consistently strong investment options in the past couple of years, and Chaudhuri said that trend is likely to continue into 2025.

“These are, after all, very cash flow rich companies, and they’re not as dependent on leverage as some other parts of markets,” Chaudhuri said of larger names such as Nvidia (NVDA) and the other “Magnificent Seven” tech stocks.

She also expects Financials (XLF) to perform well.

“If you look at earnings growth expectations, not just for Q4 … but also in Q1, in Financials is where we’re expecting to see some of the strongest earnings growth come through after Tech and Comm. Services,” Chaudhuri said. “That could be an area where investors continue to find returns like they did in 2024.”

She noted that there’s a place for bitcoin in portfolios as the conversation around cryptocurrency evolves. She likened the crypto to gold, saying both are valuable assets to have in moderation.

“We talk a little bit about adding gold and bitcoin — again, sizing appropriately,” she said. “It’s absolutely important when you’re looking at a very volatile asset class, sizing matters very much. So if you’re concerned around rising deficits, could that be an appropriate hedge?”

As many investment experts try to predict where the stock market will head in 2025, the BlackRock executive admitted that even the most prepared need to be ready to adjust to the market’s various changes.

“I think that’s one of the things that 2024 taught me — at least with an open mindset — that when the data changes, we have to be very quick and adapt ourselves to the changing narrative,” she said.

Three times each week, Yahoo Finance Executive Editor Brian Sozzi fields insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service.

Click here for in-depth analysis of the latest stock market news and events moving stock prices

Read the latest financial and business news from Yahoo Finance