Expect a manufacturing revival and a small-cap resurgence in 2025.
That’s according to Scott Helfstein, head of investment strategy at Global X ETF. After a grueling 23 months of contraction, “modest protectionist policy might help jump-start production,” he says.
Manufacturing: From Doldrums To Dynamo
Despite its diminished role compared to services, manufacturing still packs a $7 trillion punch—roughly 25% of GDP. Global X sees tariff policies and supply chain recalibrations as potential sparks for growth.
Here's the kicker: historical trends show even a 1% bump in tariffs can lead to a 0.2% boost in new orders and longer work hours. Expanding business services will offset higher prices weighing on consumers, Helfstein predicts.
The Industrial Select Sector SPDR Fund (NYSE:XLI) provides investors with exposure to some of the top names in the industrial and manufacturing space.
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Small Caps: Ready To Run
Should small-cap companies return to prior spending levels, that could amount to $140 billion and a 4% lift to nonresidential private investment, Helfstein adds.
Deregulation and improved business conditions could reignite their capital expenditures, he explains. So while these companies may not dominate headlines like their mega-cap peers, their ability to drive localized growth and market expansion is hard to ignore.
Popular ETFs such as the iShares Core S&P Small-Cap ETF (NYSE:IJR), the iShares Russell 2000 ETF (NYSE:IWM) and the Vanguard Small Cap ETF (NYSE:VB) provide exposure to small-cap stocks in the U.S.
Valuations: Lofty, But Justified?
With the S&P 500's forward price-to-earnings ratio sitting at a lofty 24x, skepticism is natural. But Global X argues this could be part of a lasting shift, fueled by record-high profit margins and companies doubling down on tech-driven efficiencies.
And here's the standout stat: 73% of the S&P 500 is trading above its 200-day moving average. That’s a sign that market breadth is improving. Pair that with a manufacturing rebound and small-cap revival, and the path to broader participation looks clearer.
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