According to strategists at Capital Economics, the USA stock market may achieve over 20% growth for the third consecutive year in 2025. If this prediction comes true, it would be only the second time in history that the USA stock market has experienced such significant growth for three consecutive years.

The last time the USA stock market completed the 'trick' of over 20% annual growth was during the late 1990s Internet Plus-Related bubble, when the S&P 500 Index rose by 31% in 1997, 27% in 1998, and 20% in 1999.

The ROI for the S&P 500 Index is approximately 24% and 23% for 2023 and 2024 respectively.

The report points out that the two main drivers continuing to push the bull market this year are similar to last year: investor enthusiasm for AI and the exceptionalism of the USA. Senior market economist Diana Iovanel at Capital Economics stated, 'We believe that the enthusiasm surrounding AI will further boost the prices of major USA Technology stocks, especially through higher valuations.'

Iovanel emphasized that compared to the Internet Plus-Related bubble period, the current PE of USA stocks is still far below the peak, indicating that there is still room for further growth in the USA stock market.

Iovanel remarked, 'Furthermore, the excess returns of Industries that include major Technology stocks—an valuation indicator that takes the real 'risk-free' rate into account—are still far above the level during that bubble peak.'

Another reason for the strong performance of the USA stock market is the solid foundation of the USA economy.

Iovanel stated that the USA economy is expected to continue outperforming major developed economies in 2025, which will help improve corporate profit expectations.

The report also added that Trump's second term should make US Stocks more attractive relative to international markets, partly due to the proposed trade policies.

Iovanel said: "We expect that he will hinder the prospects of non-US Stocks through universal tariffs to aid the relative performance of US Stocks."