As one 12 months moved in the direction of its finish, it’s straightforward to look again and replicate on those that acquired away. Inventory market stars this 12 months embody Palantir, a share I checked out intimately again in January. I didn’t make investments however the share has since soared 358%!

With a brand new 12 months underneath a fortnight away, my consideration is popping to what alternatives the inventory market would possibly supply me in 2025.

Causes to be cheerful in 2025

May the approaching 12 months be a superb one for the inventory market?

We’ve already seen the FTSE 100 index hit an all-time excessive this 12 months. So too have the NASDAQ, S&P 500, and Dow Jones Industrial Common indexes on the opposite aspect of the pond.

Not solely is there clear momentum, investor enthusiasm appears excessive and plenty of companies have been reporting sturdy efficiency in 2024. If these constructive components can proceed, maybe aided by improved financial efficiency within the US, we may see additional inventory market information shattered in 2025.

Warning indicators flashing

Nonetheless, as billionaire investor Warren Buffett says, traders ought to be fearful when others are grasping. I feel it’s notable that Buffett has been promoting tens of billions of kilos’ value of shares this 12 months.

What occurs within the US financial system and certainly the world financial system stays to be seen. This 12 months has seen an unconvincing efficiency within the British financial system for my part. I may see us dipping into recession subsequent 12 months as simply as limbering up for a brand new progress spurt.

My greatest concern concerning the inventory market as we head in the direction of 2025 is valuation.

The Palantir inventory price has surged, nevertheless it now trades on a price-to-earnings ratio of 385. Even permitting for doubtlessly stronger earnings in future, that appears loads like bubble territory to me.

What I’m doing earlier than the 12 months ends

The UK market appears to be like much less overvalued than its US counterpart for my part. But when the US sees a crash in 2025, I feel the London market would certainly endure too.

I’ve been promoting off some shares in my portfolio that I reckon look overvalued. However I’ve additionally been shopping for recently, as I proceed to see some shares as bargains even because the market general appears more and more frothy to me.

That displays my method of shopping for particular person shares somewhat than making an attempt to “buy the market”, for instance by investing in a tracker fund.

For instance, one share I bought within the final month is JD Sports activities (LSE: JD).

The FTSE 100 retailer has had a tricky 12 months on the inventory market, starting with a revenue warning in January.

It’s down 39% to this point this 12 months and 40% over 5 years. Mixed with a dividend yield of lower than 1%, it might not seem like a really enticing share to purchase.

I do see dangers right here, reminiscent of the associated fee and execution dangers of the corporate’s aggressive retailer opening plan at a time of weak client confidence.

However I reckon the present JD Sports activities share price may become a long-term discount. Demand for sportswear is more likely to stay excessive and the corporate’s world operation offers it economies of scale. It has a robust model, massive buyer base and thrilling progress plans.