Scott Wren, senior global market strategist at wells fargo & co, stated that the stock market is expected to provide strong returns for investors in 2025, but there is one sector that investors should avoid.

Wren, who had previously predicted an economic recession and a put on the stock market earlier this year, stated that he expects a bullish backdrop for the stock market in 2025 and predicts that the s&p 500 index could rise to 6,600 points by the end of next year. In an interview with the David Lin Report on Monday, he mentioned that this implies a 10% increase from current levels, primarily driven by the resilience of the usa economy and declining interest rates.

Wren added that inflation may bottom out in the short term, but could come closer to the federal reserve's target of 2% in the coming years. He predicts that the federal reserve might lower interest rates by another 100 basis points, with next year's GDP growth likely stabilizing around 2.5%.

He said, "I think investors have a good reason to increase their shareholding in stocks and seek good returns next year, as inflation is not at the desired level of the federal reserve but also not excessively high."

Wren stated that this also provides a good reason for investors to avoid defensive stocks.

He said, "What we are trying to do is engage more in cyclical industries that are sensitive to domestic and global economies, and if we see a significant market pullback, we will definitely increase our positions. That is, anything but defensive stocks." He added that the firm expects returns in sectors such as utilities, medical care, and consumer staples to be relatively lackluster.

Some market commentators predict that defensive industries such as energy and utilities will see significant gains, as these sectors are considered the main beneficiaries of the ai boom.

Rehn stated: "With technologies like datacenters and ai, utility companies will benefit to some extent, but in the short and medium term, their revenue will not be as sensitive to economic recovery, and it has always been this way. So you must ask yourself: in a better economic performance, which industries and companies will benefit from profit growth?"

Rehn specifically pointed out financial stocks, which will benefit from the growing demand for loans and falling interest rates; while large cap stocks often have better cash flow, access to crediting, and provide more products to consumers.

Wall Street is optimistic about the outlook for the USA stock market in 2025, especially against the backdrop of the elected president Trump likely introducing some market-friendly policies. However, forecasters generally expect the stock market's gains to be more moderate compared to this year, with the s&p 500 index having risen 26% so far in 2024.

Deutsche Bank's outlook report released this week predicts that due to improved investor risk appetite and a recovery in business activity, the benchmark index could rise another 17% next year, reaching 7000 points.