As we step into 2025, investors are eagerly awaiting the prospects for small-cap stocks. In this article, we will delve into the insights provided by Global Advisors’ managing partner, Tom Lee, and New Street Advisors CEO, Delano Saporu, on the potential of small-cap stocks in the coming year.
A Promising Outlook for Small-Cap Stocks
In a recent interview with CNBC, Tom Lee shared his thoughts on the potential of small and mid-cap stocks in 2025. According to Lee, the upcoming year is expected to be favorable for small and mid-cap stocks due to interest rate cuts and the incoming administration. Companies are likely to be expansionary and confident about mergers, which will lead to a surge in growth.
Lee emphasized that small-cap stocks are trading at a discount with a medium P/E multiple of 10. He predicted that small caps could outperform by more than 100% in the next couple of years. This optimism is shared by New Street Advisors CEO, Delano Saporu, who believes that small-cap stocks are well-positioned to outperform in 2025.
The Economy and Small-Cap Stocks
Saporu pointed out that the economy has shown resilience in 2024, particularly in the last quarter. This recovery signals a promising outlook for businesses. Additionally, Donald Trump’s win has already driven significant gains in small-cap stocks due to the growing enthusiasm around the potential easing of regulations on businesses.
Small-cap stocks are conventionally focused on the domestic market, with less exposure to international trade compared to large-cap counterparts. Therefore, Trump’s tariff policies will not have a major impact on small-cap stocks compared to large-cap stocks.
US Stock Market Performance in 2024
Heading into 2025, the US stock market is expected to deliver a second consecutive year of impressive gains. The S&P 500 index surged more than 25% in 2024, while the tech-heavy Nasdaq 100 jumped up to 28%. The Russell 2000 index, which covers small-cap companies, soared more than 15% over the last year, and the Dow Jones U.S. Small-Cap Index has risen by 18%.
Apollo Global Management’s Economic Outlook for 2025
Torsten Slok, economist at Apollo Global Management (APO), released his 2025 economic outlook for the US. According to Slok, the US economy will deliver strong results with no signs of major slowing in 2025. He added that interest rates will likely stay ‘higher for longer’ despite the Fed’s current interest rate-cutting cycle.
The US economy is expected to register GDP growth of 2.2% in 2025, signaling a modest growth driven by less restrictive monetary policy, resilient consumer spending, and a steadying labor market.
Why Tetra Technologies, Inc. (NYSE:TTI) is on Our List
Tetra Technologies, Inc. (NYSE:TTI) ranks 5th on our list of Best Penny Stocks To Invest In According to Media. While we acknowledge the potential of TTI to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame.
Key Highlights from Tetra Technologies, Inc.’s (NYSE:TTI) Q3 Performance
- Revenue is down from last year at $142 million, a decline of 6% year-over-year.
- The company’s completion fluids and products and water and flowback services achieved adjusted EBITDA margins of 31.7% and 14.6%, respectively.
- Tetra Technologies, Inc. (NYSE:TTI) is advancing its strategic initiatives by introducing Tetra X and TETRA Oasis TDS.
Conclusion
As we step into 2025, small-cap stocks are expected to shine due to interest rate cuts, the incoming administration, and a resilient economy. Global Advisors’ Tom Lee and New Street Advisors’ Delano Saporu share their optimism about the potential of small-cap stocks in the coming year.
While Tetra Technologies, Inc. (NYSE:TTI) has shown promise with its Q3 performance, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns within a shorter time frame. If you are looking for an AI stock that is more promising than TTI but trades at less than 5 times its earnings, check out our report on the cheapest AI stock.
Disclaimer
None. This article is originally published at Insider Monkey.