The stock market has had a stellar run in 2024. Here in the UK, the FTSE 100‘s up 12%, including dividends, and across the pond, the S&P 500 has delivered an even more explosive 30%! Both indices are up almost double what they’ve historically delivered over the last decade, propelling investor wealth to new heights.
So with 2024 coming to a close, the question on most investors’ minds is whether this upward trajectory will continue.
Where’s the stock market heading?
As always, when it comes to the short term, there’s a lot of uncertainty surrounding stocks. Here in the UK, the new government Budget is expected to deliver 2% GDP growth next year. And under the incoming Trump administration, economic forecasts for America predict slightly higher 2.5% growth over the same period.
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The stock market and the economy aren’t the same entity. But when the latter’s expected to do well, the price of shares rises. That’s because shareholders are forward thinking. And a lot of the momentum seen in 2024 has, in part, been driven by the expectations of a stronger economy next year. Provided this becomes a reality and economic growth’s expected to continue into 2026, the stock market’s likely to continue rising throughout 2025.
At least that’s what analyst projections currently indicate. The FTSE 100’s predicted to reach just shy of 10,000 by the end of next year. And the S&P 500’s on track to hit 6,666, according to Bank of America. Both suggest double-digit returns lie ahead. And while forecasts always need to be taken with a pinch of salt, I remain cautiously optimistic for next year.
Capitalising on returns
Let’s assume analyst projections are accurate and the stock market will grow next year. Which stocks should investors be looking to buy?
Right now, my attention’s turning to local small- and mid-cap companies. After all, domestic enterprises are among the biggest beneficiaries of GDP growth. And with most still reeling from the recent stock market turmoil in 2022, there are plenty of bargains to be had as well.
One stock I’m currently considering is Bioventix (LSE:BVXP). After falling by almost a third throughout 2021, the small biotech group has bounced back, with its latest results showing even more growth potential lying ahead.
As a manufacturer of monoclonal antibodies for blood testing, management isn’t short on demand, albeit sometimes cyclical. The group’s R&D efforts recently revealed a new antibody that can be used to detect Alzheimer’s disease. And it’s now started contributing some modest revenue.
However, with new Alzheimer’s drugs starting to enter the market, the need for a patient monitoring solution like Bioventix’s should surge over the next decade, along with its share price. Of course, this assumes these new antibodies prove to be a commercial success, which is far from guaranteed.
However, as investor confidence rises throughout 2025, the excitement surrounding Bioventix could push its valuation higher in the short term before its valuation becomes backed by fundamentals in the long run.
