The US stock market posted stellar benchmark performance in 2024 S&P500 index reached an all-time high closing value of 6,090.27 on December 6.
But things could get even better in 2025. According to Charles Schwab, based on fourteen interest rate cycles since 1929, the S&P 500 index has returned 86% of the time twelve months after the first rate cut in the cycle. The benchmark index posted negative returns after interest rate cuts in 2001 and 2007, mainly due to the recession.
In September 2024, the Federal Reserve began its ongoing rate cutting cycle by cutting interest rates by 50 basis points. Since the current economic environment does not appear to be in recession, it may be wise to expect the index to continue growing until September 2025. Many analysts seem to agree with this forecast. UBS expects the S&P 500 to reach 6,400, while Oppenheimer Asset Management chief investment strategist John Stoltzfus expects the index to reach 7,100 by 2025.
Against this backdrop, it makes sense for retail investors to take small positions in high-quality stocks, thanks to the secular tailwind. Here’s why these two companies’ choices fit the bill.
When you invest in stocks in database software and cloud services, Oracle (NYSE: ORCL) is an obvious choice. The company’s top and bottom-line performance in the second quarter of fiscal 2025 lagged consensus estimates by a slight margin (for the period ended November 30). Still, the company’s prominent role in the ongoing AI revolution and its strength in traditional databases make it a valuable choice in December 2024.
Oracle’s cloud services and licensing support revenues account for nearly 77% of the company’s total revenue. Its cloud business is expected to generate $25 billion in revenue in fiscal 2025. Oracle’s prominence in delivering artificial intelligence (AI) optimized data center infrastructure is the key factor driving the growth of its cloud business. The company’s Oracle cloud infrastructure is used by major AI companies such as Nvidia, MetaplatformsxAI, OpenAI and Cohere to train their top generative AI models.
Oracle is also focused on further improving the performance of its cloud infrastructure and recently released the world’s largest and fastest supercomputer, using up to 65,000 Nvidia H200 GPUs. This performance advantage has made Oracle’s cloud infrastructure faster and cheaper than many competing infrastructure clouds, allowing it to win large AI training workloads. The company’s GPU usage also increased by a whopping 336% year over year in the second quarter.