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Just a couple of trading days are left to end 2024. Wall Street has been on a historic rally, buoyed by the artificial intelligence (AI) craze and rate-cut optimism. A surge in technology stocks and the rise in the share of "Magnificent Seven" have also added to the strength. Trump’s win in the presidential election also bolstered optimism.

The tech-heavy Nasdaq Composite Index led the charge, rising 31.4%. The S&P 500 and the Dow Jones are up 25.2% and 14.1%, respectively and are on track for the best year since 2021. 

Below, we discuss some of the top events of 2024 that influenced the market in a big way and are expected to prevail in 2025:

Fed Rate Cuts

Federal Reserve Chair Jerome Powell kicked off the new rate cycle era by initiating a 50 basis points cut in interest rates in September after holding it at a 23-year high for 14 consecutive months since July 2023. The Fed slashed rates further in November and December by 25 bps each. The central bank envisions only two rate cuts in 2025, in contrast to four projected in September, given a solid labor market and sticky inflation.

Low rates reduce the cost of borrowing, which is often needed to finance the expansion of companies, thereby driving growth. This can positively impact sectors like real estate, consumer discretionary and financial services, which are typically sensitive to interest rate changes. 

In real estate, lower rates can boost housing market activity by making mortgages more affordable. For consumer discretionary sectors, reduced borrowing costs can lead to increased consumer spending. In the financial sector, while lower rates can compress net interest margins for banks, they can also encourage lending and potentially lead to increased consumer and business loan activity.

As such, investors could bet on any of these sectors to magnify gains for the rest of the year. One of the exciting options could be GameStop Corp. (GME - Free Report) , which is the world's largest video game retailer. The company offers the best selection of new and pre-owned video gaming consoles, accessories and video game titles in both physical and digital formats. GameStop saw a positive earnings estimate revision of 12 cents over the past 30 days for the fiscal year (ending January 2026) and has an estimated earnings growth of 125%. It sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of B.

Trump Trade

Wall Street remains optimistic about the incoming administration’s economic agenda. President-elect Trump’s policies on restricting illegal immigration, enacting new tariffs, lowering taxes and reducing regulations will likely boost the economy. Banks are well-positioned to benefit from Trump’s deregulation and lower corporate tax policies. Trump can usher in a “new era” of lighter financial regulation after 15 years of stricter control following the financial crisis of 2008-2009. Additionally, Trump emphasizes energy independence, and his policies are likely to favor fossil fuels, promoting deregulation in the oil, gas, and coal industries. He is in favor of expanding oil exploration, including increased fracking activities. 

Zacks Rank #2 (Buy) Houlihan Lokey (HLI - Free Report) is a global investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and financial and valuation advisory. The company’s earnings are expected to grow 27.8% in the current fiscal year (ending March 2025) and 23.1% in the next fiscal year. Houlihan Lokey has a Growth Score of A.

Bitcoin Bull Run to Continue

Bitcoin has been one of the best trades of President-elect Donald Trump. The digital currency reached a record high of more than $108,000 on Dec. 17 before declining in recent weeks. Bitcoin is up 130% this year, outperforming traditional investments like stocks, bonds and gold, driven by strong investor and institutional demand, Fed rate cuts, and optimism for a cryptocurrency-friendly regulatory environment under Trump. The President-elect has vowed to make the United States “the crypto capital of the planet.” 

Coinbase Inc. (COIN - Free Report) is an American publicly traded company that operates a cryptocurrency exchange platform. This Zacks Rank #1 stock is the largest cryptocurrency exchange in the United States in terms of trading volume. Coinbase saw a solid earnings estimate revision of 9 cents for 2025 over the past month.

AI Boom to Bolster Utility

The AI boom will continue to fuel the rally in the broader equity market, with companies investing huge sums in the technology sector and beyond. The expansion of AI applications holds the promise of ushering in fresh growth opportunities in the tech sector and beyond. The generative AI market is poised to explode, seeing a CAGR of 42% to $1.3 trillion over the next 10 years from a market size of just $40 billion in 2022, according to a new report by Bloomberg Intelligence. 

Though technology seems to have become expensive, utilities remains an untapped area. AI is bolstering electricity demand, as data centers require tons of energy for computing and cooling power. A simple ChatGPT task uses 10 times the energy a normal Google search does. So, data centers with a capacity of 30 megawatts are boosting capacity to handle 300 megawatts of power. This has made the traditional utilities sector of the market most appealing. 

Investors seeking to make the most of the next leg in the AI industrial revolution should consider utility stocks. Vistra Energy Corp. (VST - Free Report) , having a Zacks Rank #1 and a Growth Score of A, seems an exciting pick. This is an energy company that offers electricity and power generation, distribution and transmission solutions. The stock saw positive earnings estimate of 6 cents over the past 30 days for 2025 with an estimated growth of 36.8%.

"Magnificent Seven" to Magnify Further

The so-called "Magnificent Seven" stocks have been on a spectacular ride this year and are one of the big forces driving the broad market rally. The Magnificent Seven market-cap valuation surpassed $18 trillion for the first time ever, according to Dow Jones Market Data. With a combined weightage of 31% in the S&P 500, these stocks are poised to see more gains in 2025. While NVIDIA (NVDA - Free Report) exploded by more than 175% this year, Tesla (TSLA - Free Report) , Meta Platforms (META - Free Report) , Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) reached record highs.

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