Investing.com -- Raymond James analysts predict a"reversion to the mean" trade in 1Q25, saying that extreme narrowing in U.S. equity markets during 4Q24 gives way to broader participation.
The narrow market rally, initially concentrated on the"Mag 7" stocks, has spread to other sectors, leaving indices historically expensive in price-to-earnings terms, while the median equity remains relatively undervalued, according to the firm. Key factors expected to drive this shift include a stabilization or decline in 10-year Treasury yields, which have been a significant influence on market breadth.Additionally, they believe that potential events like another debt ceiling debate or discussions about ending quantitative tightening could also pressure yields lower.