President-elect Donald Trump’s second term could usher in a number of surprises for investors to capitalize on in the year ahead, according to Evercore ISI. “Trump’s ability to dominate the news cycle, exert influence on financial markets and his desire to leverage uncertainty as a critical component of advancing his agenda by definition ensures that most of 2025 will be a Surprise,” wrote analyst Julian Emanuel in a Sunday note. “Surprise at home and abroad, in Policy, Financial Markets, and Society writ large.” The remarks come as the market gains that were seen immediately following the former president’s victory back in November last year have been almost entirely wiped out . With the reversal, the S & P 500’s returns since Election Day are on pace for the index’s worst performance between an election and subsequent inauguration since Barack Obama’s in 2009. Ahead of Trump’s inauguration, Emanuel has listed what he believes could be some of the most important surprises in 2025, including the broad market index seeing major gains once again. Topping the list as the most probable outcome this year, the S & P 500 could advance 20% for a third year in a row. This wouldn’t be the first time this has happened, as the index hit that level in 1997, 1998 and 1999, Emmanuel noted. This year’s surge would be “powered by the potential that AI is at a significant ‘adoption inflection’ … point in 2025 and buoyed by the knowledge that high Valuation alone doesn’t end Bull Markets – at least not before a period of intense Capital Markets activity and individual investor FOMO,” he wrote in the note, adding that bulls being at 34.7% is “a long way” from the 60% threshold needed to define the market as “irrational exuberance.” “Stocks could soar again, 20%+, in 2025,” he said. To play this surprise, Emmanuel suggests investing in artificial intelligence -related stocks, specifically Russell 3000 companies that have mentioned AI in their third-quarter earnings calls, saw a positive reaction to their earnings, whose price-to-earnings ratio for 2025 trades at a discount to the five-year average forward P/E ratio and whose EPS growth forecast is greater than 9.6% – which is Evercore ISI’s 2025 EPS growth forecast for the S & P 500. Along with AI darling Nvidia , names that fit that criteria include wireless carrier T-Mobile , entertainment company Disney , online travel company Expedia and audio streaming giant Spotify . All of those stocks have spent the past six months in the green. Spotify leads the way in gains within that period, rising more than 51%, followed by Expedia at more than 37% and T-Mobile at nearly 19%. Meanwhile, Disney has risen more than 11% within that timeframe, while Nvidia has moved around 3% higher. While the S & P 500 has also seen gains in the past six months, adding about 4%, it’s been off to a rough start to the year, falling nearly 1% month to date. .SPX 1Y mountain S & P 500, 1-year Another potential surprise on the list is that EPS estimates for the S & P 500 don’t drop from the current estimate of $274 and 14.6% in year-over-year growth. “If economic growth comes in above estimates – especially overseas – the Dollar moderates its strength, and already elevated margins remain elevated for yet another year, EPS estimates don’t have to fall,” Emmanuel also wrote. “And that is particularly good news for the ‘other 490’ stocks in the S & P 500, who are expected to outshine the ‘Mag 7’ … for the first time since ChatGPT was introduced to the World.” If that ends up being the case, the analyst points to the Invesco S & P 500 Equal Weight ETF (RSP) as an investment idea, as those companies will “more than contribute their fair share in growing earnings” compared with the “Magnificent Seven” and allow the fund to reclaim some lost ground. Over the past six months, the RSP has also risen more than 3%, tracking just below the S & P 500 in that same period. In the last year, the fund has jumped about 12%. RSP 1Y mountain RSP, 1-year That said, China could wind up being the best performing market this year, another surprise scenario on the list. Emmanuel anticipates that if conditions become “so bad” in the country, any ounce of positive news could spark a major rally in that market. “What if the CCP delivers even more additional stimulus than expected at the next meeting in March, while the end result of the long anticipated Trade War about to occur with the U.S. is not as bad as feared?” he wrote. “Visions of Trump and Xi strolling serenely through the flora and fauna at Mar-a-Lago some years ago remain a not that distant memory.” With that in mind, the analyst believes investors should also consider buying shares of the iShares China Large-Cap ETF (FXI) . That fund has risen nearly 6% in the past six months and more than 26% over the last year.
