After a stellar finish to 2024, the S&P 500 seemed as if it was primed to continue surging in 2025. Yet following the announcement of worldwide tariffs, the US stock market has subsequently proceeded to plummet, with its flagship index down more than 15% since the start of the year and over 12% since the start of April. At least that was the case until last week when tariffs were delayed, and US stocks shot back up.
Year to date, the S&P 500 was still down almost 9% as of 11 April. However, ignoring the recent rebound, any investor who put £5,000 to work at the start of the year with an index fund would only have £4,250. And the situation was even worse for those who concentrated on the Magnificent 7. On an equal-weighted basis, shares of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia (NASDAQ:NVDA), and Tesla crashed. They were down over 25%, taking a £5,000 initial investment all the way down to £3,750.
There’s no denying it was a painful start to the year, especially for newer investors. Yes, last week’s upward surge helped take some of the pain away. But plenty of S&P 500 stocks are still trading lower today compared to the start of the year.
Investing during volatility
When investing in a volatile environment, ensuring we have some dry powder is often a prudent move. Apart from providing some helpful savings during economic turmoil, this cash offers the flexibility. It can allow investors to start buying shares when prices are in freefall. After all, some of the biggest gains we can make are during a stock market crash.
Another handy tactic is keeping a list of top-notch stocks to buy once the share price looks more attractive. That way, investors don’t need to spend countless hours investigating opportunities when disaster strikes. By being prepared, there’s a lower risk of missing out on potentially lucrative investments.
US stocks to consider in 2025?
It’s impossible to know for certain when the latest round of volatility will reach its bottom. As such, deploying a dollar cost-averaging buying strategy is likely prudent. And one Mag 7 business that I’ve got my eye on in this market is Nvidia.
The GPU chip designer is proving to be the dominant business in the AI infrastructure landscape, with some phenomenal growth under its belt. And despite US economic concerns, spending on AI-accelerator chips is set to reach $315bn in 2025.
Semiconductors have been excluded from the announced US tariffs. While the same isn’t true for other raw materials that go into Nvidia products (like steel and aluminium), customers might still just pay the higher cost to get their hands on Nvidia hardware.
After its 30% tumble this year, Nvidia shares now trade at a forward price-to-earnings ratio of 21. That’s significantly cheaper than its historical average of 52. With that in mind, assuming that AI adoption doesn’t hit a wall, steadily drip-feeding capital into the S&P 500 stock might be an investment worth considering throughout 2025.
