The end of the year is a good time for stock market investors to assess their holdings. Now is the time to think about locking in any profits or losses so you can make the required trades before the end of the taxable year, as making Adjustments made before the end of the year will impact your tax liability for 2024.
This is also an excellent opportunity to look down any investments you may wish to sell, regardless of the tax ramifications, if you own a large number of individual stocks. Consider what might happen in the upcoming year and whether your initial investment thesis still seems sound.
A new presidential administration, the prospect for inflation, the Fed’s potential interest rate actions, and other events could all affect your decision to stick onto your current investments.
Before we enter 2025, there are ten equities that you should absolutely think about selling, according to financial analysts. Pay attention if you have these companies in your portfolio.
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Contractors for Defense
Although Boeing’s difficulties during the past year during a rising market make it abundantly evident that this isn’t always the case, large defense contractors have historically been rather safe investments in the stock market. According to Peter C. Earle, senior economist at the American Institute for Economic Research, the industry may face difficulties in the future.
“The biggest publicly traded defense contractors, Lockheed Martin (LMT) and Raytheon (RTX) may be ready for a pullback if the incoming Trump administration fulfills its promises to leave other countries to fend for themselves,” Earle stated.
Sustainable Energy
Given that the Biden administration’s Inflation Reduction Act included significant subsidies for renewable energy, Earle also sees risk in the green energy industry. Many of the solar, wind, and alternative energy source companies will be in grave danger if those are cut back or removed.
Import-Reliant Businesses
Earle added that trade protectionism, which refers to government policies that limit international commerce in an effort to support home sectors, was a key component of the Trump campaign. Because of the potential for unforeseen outcomes, such actions are frequently controversial.
If tariffs of the kinds discussed—60%, 100%, 200%, and so forth—were implemented, retaliatory duties would be imposed. These might then destroy businesses that depend on imports, such as bargain stores, automakers, medical device manufacturers, and consumer electronics companies. These might include Sony Corporation (SONY), Boston Scientific (BSX), and Walmart, which sources 70–80% of its products from Chinese vendors (WMT), according to Earle.
Luxurious/Discretionary Consumer Products
Businesses that offer unnecessary goods and services are frequently badly impacted in an inflationary and high-interest-rate climate. The CEO of Signals, an investing intelligence platform that helps investors predict market changes by analyzing consumer spending patterns, is Derrick Fung. His analysis indicates that these “nice to have” products have seen a noticeable decline. His platform has specifically provided a “sell” signal on equities such as Victoria’s Secret (VSCO), Arhaus (ARHS), and Coty (COTY).
Even if you may not know much about the fashion and cosmetics conglomerate Coty, you are undoubtedly familiar with their products. Coty encompasses both mainstream companies like Adidas Covergirl and luxury brands like Burberry, Tiffany, and Calvin Klein. Arhaus is an online and physical store of high-end, ethically produced home furnishings. Of course, one of the most well-known specialist stores for lingerie and sleepwear is Victoria’s Secret.
According to our statistics, all of the aforementioned names have been trending downward. The basis for [all of them] is the brand’s popularity; all of the brands have begun to lose their attractiveness, either to competitors (like Coty to Elf Beauty, Lululemon to Alo Yoga) or the category is experiencing a secular decline, according to Fung.
Use Caution
“Forecasts have an uncanny way of making us appear mistaken. Any of these estimates could turn out to be inaccurate or unimportant due to other variables, Earle stated. It’s important to remember that predicting the future is challenging. Take caution not to overreact to trends that are ultimately only temporary.
Earle strongly recommends that investors consult their financial advisor before making any major decisions about buying, selling, or holding investments. Regardless of what happens in 2025 or later, a qualified advisor can assist you in making the best investment decisions for your particular circumstances.
Conclusion
As we approach the end of the year, it’s an opportune moment for investors to evaluate their portfolios and make informed decisions about their holdings. While certain sectors like defense contractors, sustainable energy, import-reliant businesses, and discretionary consumer products may face challenges in the coming year, it’s essential to approach these predictions with caution. Market trends can be unpredictable, and external factors often shape outcomes in unexpected ways.
Investors should focus on the long-term viability of their investment strategies rather than reacting impulsively to short-term market movements. Consulting with a financial advisor is a prudent step to ensure your portfolio aligns with your financial goals and risk tolerance. By carefully assessing your holdings now, you can position yourself to navigate the uncertainties of 2025 and beyond with confidence.
FAQs
1. Why is the end of the year a crucial time for assessing stock market holdings?
The end of the year is important because it allows investors to lock in profits or losses that can impact their tax obligations for the current year. Making strategic trades before the year ends can optimize tax benefits and prepare your portfolio for the upcoming year.
2. Which sectors should investors be cautious about heading into 2025?
Sectors like defense contractors, sustainable energy, import-reliant businesses, and luxury consumer products may face challenges due to changing policies, economic conditions, and shifts in consumer behavior. It’s essential to evaluate these sectors carefully based on your investment goals.
3. Should I sell my stocks if they are listed as potentially risky investments?
Not necessarily. Investment decisions should be based on your financial goals, risk tolerance, and long-term strategy. It’s advisable to consult with a financial advisor before making any significant changes to your portfolio, as market trends and predictions can often shift unexpectedly.
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