The Christmas Tree of ETFs is Ready to Spread Cheer

Core Viewpoint - The article presents a metaphorical "Christmas tree" built with various ETFs, suggesting that these investment vehicles are poised to perform well as the market heads into 2025, driven by factors such as the AI boom, lower interest rates, and potential policy changes under the Trump administration [1]. Market Overview - The SPDR S&P 500 ETF (SPY) serves as the foundational base of the tree, reflecting a significant rise of over 24% in 2024, attributed to the AI boom and lower interest rates, with additional momentum from Trump's presidential election win [2]. - The second Trump administration is expected to positively impact stocks through policies aimed at deregulation, lower corporate taxes, and energy independence, which may favor fossil fuel industries [3][9]. Small-Cap and Growth ETFs - The iShares Russell 2000 ETF (IWM) is highlighted as a top layer, with expectations for small-cap stocks to outperform due to a strong economic outlook, low interest rates, and favorable tax and regulatory conditions [4]. - The "Magnificent Seven" stocks are identified as key drivers of the market rally, benefiting from the AI boom and reduced rates, with expectations for continued strong performance into 2025 [5]. Sector-Specific ETFs - The SPDR S&P Bank ETF (KBE) and Energy Select Sector SPDR (XLE) are recommended for inclusion in the ETF tree, both holding a Zacks ETF Rank of 2, indicating a buy rating [10]. - The First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT) is noted for its exceptional performance, nearly doubling in value this year, driven by a surge in Bitcoin prices [11]. Additional Investment Opportunities - The Vanguard Growth ETF (VUG) is suggested as a strong candidate for growth investing, which tends to outperform in a trending market characterized by prolonged uptrends [13]. - Silver ETFs, particularly the iShares Silver Trust (SLV), are expected to perform well in 2025, benefiting from lower rates and safe-haven demand, with SLV having an AUM of $14 billion and an expense ratio of 0.50% [14].