Investing.com — In a current notice, Financial institution of America outlined 14 key classes from 2024 that traders ought to take into account as they head into 2025, warning that market momentum and stretched valuations might face headwinds within the 12 months forward.

Whereas this 12 months resembled the regular good points of 1996-97, moderately than the bubble peaks of 1998-99, dangers are mounting—from geopolitical tensions and rising debt to market fragility highlighted by the VIX.

BofA factors to alternatives in Europe, China, and Japan however cautions that volatility, commerce disputes, and macroeconomic uncertainty will form the subsequent leg of the market cycle.

Under are the 14 classes that BofA highlighted.

1. 2024 was a robust 12 months for markets, however it would possibly solely be the start.

2. The market’s efficiency in 2024 seemed extra just like the regular good points of 1996-97 than the bubble peaks of 1998-99.

3. In a bubble atmosphere, market management can persist for longer than traders can afford to remain underweight.

4. Nonetheless, the mix of robust momentum and excessive valuations is already too stretched to keep away from a possible bust.

5. The has proven that markets stay fragile, and a serious shock could also be overdue.

6. August 2024 suggests shopping for market dips and locking in volatility spikes; utilizing smarter methods like skewed delta positioning could also be key for 2025.

7. Rising debt ranges and chronic inflation imply bond vigilantes stay essentially the most seen macroeconomic tail danger.

8. Market fragility, sooner reactions, and elevated valuations recommend a repeat of the calm volatility seen in 2017 is unlikely.

9. A Trump election victory has reignited issues round tariffs, with European firms favored by greenback power doubtlessly turning into the subsequent commerce targets.

10. European equities stay low-cost and unloved—traders must be cautious about being caught brief, as fewer crowded trades imply much less volatility ache.

11. China’s outperformance over Japan in 2024 might proceed if U.S. rates of interest decline.

12. VIX choices knowledge signifies that positioning dangers available in the market haven’t gone away.

13. Eurozone financial institution dividends have outperformed the for a lot of the previous 12 months; traders could have to hedge in opposition to a distinct consequence in 2025.

14. The danger of sharp actions within the Japanese yen, pushed by volatility, might trigger instability for the in 2025.