Will we soon see the stock market skyrocket?

In 2024, the stock market is experiencing a real upheaval. Here in the UK FTS 100 And FCS index 250 generated double-digit total revenues, while in the US, S&P 500 Index up more than 20% since January!

This explosive performance recovery is hardly a surprise. After all, we just came out of a pretty serious market correction. And the stock market has historically always demonstrated impressive growth from a low base. However, looking at the macroeconomic landscape, the growth observed today may be just the tip of the iceberg.

There are many encouraging trends that could make 2025 an interesting year for investors. So let’s take a look at what could cause stock prices to soar over the next year, as well as what could go wrong.

The Case of the Bull

With inflation largely back under control, central banks such as the Bank of England and the US Federal Reserve finally began cutting interest rates. While this means savings accounts won’t be as profitable, it will also lower the cost of debt. This makes mortgages, as well as business loans, more affordable, promoting economic growth.

This is great news for many businesses, even those with no debt on their balance sheet, e.g. Somero Enterprises (LSE:COM).

The company has experienced a significant decline in demand for its screed laying machines for construction projects, especially in the US. Most of his clients appear to be postponing projects in anticipation of lower interest rates next year.

It’s certainly disappointing to see slower growth in the short term, but it’s good to see explosive potential just around the corner. A rebound in inflation would obviously delay this expected return, and that is the risk Somero is currently grappling with. However, management has extensive experience in dealing with the cyclical nature of the construction sector, which makes me cautiously optimistic.

Beyond interest rates, there is also the promise of continued innovation in the technology sector. While AI spending may be out of control, the current consensus suggests early signs of increased profits and improved efficiencies as AI solutions are adopted across business models. And the combination of higher economic growth and increased profitability results in a powerful catalyst for the stock market.

What could go wrong?

Just as there are many things to worry about, there are also many problems brewing. We cannot ignore the escalating conflicts plaguing Eastern Europe and the Middle East. After all, both tragic wars have already negatively impacted global supply chains and caused huge supply delays.

Meanwhile, the political uncertainty of the upcoming US elections is also raising concerns about economic policy. The threat of widespread global tariffs could trigger a new round of US policy. inflationwhile higher corporate taxes could have a significant negative impact on business earnings.

Bottom line

It is impossible to know for sure what will happen in the next 12 months. Personally, I wouldn’t be surprised if I continued to see volatility the stock market is moving forward. But despite short-term headwinds, high-quality companies should be able to adapt and thrive in the long term. That’s why, even despite some legitimate concerns about the stock market, I’m quite optimistic right now.