Don’t pop the bubbly just yet.

Big Tech’s extraordinary bull run, which has seen the Magnificent 7 tack on $1.8 trillion in market value since the election, is expected to fizzle in the new year, according to famed WisdomTree economist Jeremy Siegel. Sky-high valuations are simply not in line with the sector’s real-world returns and that’s creating a worrisome outlook for tech stocks come 2025. 

“The continued dominance of the Magnificent Seven in the equity markets has been striking,” Siegel wrote in a column, citing the tech-heavy Nasdaq that surged past the 20,000-point milestone for the first time last week. It could spell a pullback as investors search for better bargains elsewhere. “While this tech-led rally persists, a recalibration and rotation is possible in January to reflect more balanced market leadership,” the Wharton School professor said.

Cost Ineffective

The biggest problem is one of the cornerstones of Big Tech’s success: artificial intelligence. While AI is projected to reshape entire segments of the workforce, it’s nowhere near making good on those expectations. Investors are projected to pump $1 trillion into AI infrastructure in the coming years, but returns on those investments are becoming increasingly unclear, per a report by Goldman Sachs. The researchers found:

• AI is expected to boost US productivity by just 50 basis points over the next decade, and push GDP up by less than 1%.
• Just a quarter of AI tasks will be cost-effective over the same timeframe.
• For all the fanfare, the technology is expected to impact less than 5% of all tasks. 

“The market’s resilience reflects continued optimism about AI-driven growth and deregulation,” Siegel said. “However, the tangible economic benefits of AI adoption remain distant.”

With automated trading and algorithm-based investments on the rise, future corrections may be sharper than previous cycles that were solely driven by human traders (remember them?), said Yashin Manraj, CEO of the finance technology provider Pvotal. In fact, future movements could be increasingly drastic. “The bull run so far has defied logical and rational metrics,” he said. “2025 will be a wild ride for most tech stocks.”

Bargain Basement. So, where’s the best place to look for a killer bargain in 2025? Siegel predicts a rotation into “neglected areas” of the market, such as value or small-cap stocks. The shift is even more likely if the new administration’s home-grown investments, and favorable stance on deregulation, create advantages for other sectors.

“Investors should remain vigilant as tech valuations climb further, with an eye toward rebalancing opportunities early next year,” Siegel wrote.

When you’re here, you’re family.

Fidelity has hired an industry veteran to lead one of the world’s largest professional networks of family offices catering to the uber-rich. Kimberly Sheehy will head Fidelity’s Communities Center of Excellence, a unit that includes the 1,700-member Forge Community, and Finteract, a peer-to-peer platform for financial advisors. The center offers access to industry research and events, among other professional connections, and members must sign a code of conduct to maintain confidentiality.

The appointment comes as competition over family offices ramps up among Wall Street’s heavyweights, with the average single-family office in the US overseeing some $2 billion in assets, according to Deloitte. “I am thrilled for this role,” Sheehy told the Daily Upside in an email, adding she’s ready to “hit the ground running” next year.

Family Ties

Money managers for the super wealthy offer a wide range of financial and lifestyle services, like tax filing, estate planning, asset management — or even dog-walking. They’re also increasingly taking on larger roles in the economy from managing billions of dollars on a family’s behalf to making strategic investments in private equity or M&A deals. It’s quickly become a major opportunity for the world’s largest investment firms:

• In November, Goldman Sachs revamped its family office platform with an “à la carte service solution” designed to meet targeted client needs and preferences.
• JPMorgan launched a dedicated practice to support its Private Bank’s largest clients and their family enterprises last year.
• Over the past two years, Apollo Global Management has been building up a unit to target family offices of the super wealthy.

There are some 3,180 family offices in North America, but Deloitte projects there will be more than 4,000 by 2030. Assets at single-family offices are also expected to surge 73% to $5.4 trillion over the same timeframe, from just $3.1 trillion today.

It feels like you can’t spell ETF these days without good ol’ USA.

ETFs hit a record $205 billion in inflows in November, and nearly three-quarters of it was invested in US equity ETFs, according to BlackRock data. The funds were boosted by a two-year bull market and an incoming Donald Trump administration that has Wall Street’s mouth watering. But for all the exuberance, foreign ETFs weren’t so lucky. About $12 billion was withdrawn from European, Japanese, and emerging market equity funds last month, marking the first time all three regions saw outflows since May 2019. 

With the US president-elect suggesting tariffs of 10% to 20%, enthusiasm for foreign market equity ETFs has quickly soured. “‘American exceptionalism’ has become a justification for shifting investments into US ETFs,” said Stephen Cucchiaro, CEO of 3EDGE Asset Management. While outflows are seldom good, the trend could be a boon for financial advisors. 

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