The U.S. stock market posted a stellar performance in 2024, with the benchmark S&P 500 index reaching an all-time high closing value of 6,090.27 on Dec. 6.
But things may turn even better in 2025. According to Charles Schwab, based on 14 interest rate cycles since 1929, the S&P 500 index has posted positive returns 12 months from the first rate cut in the cycle 86% of the time. The benchmark index posted negative returns after rate cuts in 2001 and 2007, attributed mainly to the recessionary environment.
In September 2024, the Federal Reserve commenced the ongoing rate cut cycle by reducing benchmark interest rates by 50 basis points. Subsequently, since the current economic environment does not appear recessionary, it may be prudent to expect the index to continue growing till September 2025. Many analysts seem to agree with this projection. UBS expects the S&P 500 to reach 6,400, while Oppenheimer Asset Management’s chief investment strategist, John Stoltzfus, expects the index to reach 7,100 in 2025.
Against this backdrop, it makes sense for retail investors to pick up small positions in high-quality stock riding secular tailwinds. Here’s why these two companies picks fit the bill.
When investing in database software and cloud services stocks, Oracle (NYSE: ORCL) is an obvious choice. The company’s second-quarter fiscal 2025 top- and bottom-line performance missed consensus estimates by a slight margin (for the period ended Nov. 30). Despite this, the company’s prominent role in the ongoing AI revolution and its strength in traditional databases make it a worthwhile pick in December 2024.
Oracle’s cloud services and licensing support revenue accounts for almost 77% of the company’s total revenue. The cloud business is expected to rake in $25 billion in revenue in fiscal 2025. Oracle’s prominence in providing artificial intelligence (AI)-optimized data center infrastructure is the main factor fueling the growth of its cloud business. The company’s Oracle cloud infrastructure is used by major AI companies such as Nvidia, Meta Platforms, xAI, OpenAI, and Cohere to train their most important generative AI models.
Oracle is also focused on further improving the performance of its cloud infrastructure and recently released the largest and fastest supercomputer in the world, which uses up to 65,000 Nvidia H200 GPUs. This performance advantage has made Oracle cloud infrastructure faster and cheaper than many competing infrastructure clouds, helping it win large AI training workloads. The company’s GPU usage also jumped by a stunning 336% year over year in the second quarter.
