A veteran strategist sees an 'extraordinary' S&P 500 surge ahead — and shares 3 top ways to invest your money

• 2025 will be another banner year for US equities, an uber-bullish strategy chief predicts.
• An avalanche of cash can push the S&P 500 as high as 7,400 by the end of next year.
• Here are three ways that market participants can prepare their portfolios for takeoff.

A red-hot S&P 500 will defy the odds again by continuing to sprint higher in 2025, says Mary Ann Bartels, the chief market strategist at Indianapolis-based Sanctuary Wealth. She expects the index to reach a jaw-dropping range of 7,200 to 7,400 before the end of next year.

This mind-bending, multi-year market rally may still be in its early stages, as Bartels' research indicates that the S&P 500 can go higher to 8,000 or 10,000 by the end of the decade.

"If we are to repeat this cycle of boom-bust similar to the 1920s, 1950s, 1960s, 1980s, and 1990s, we believe we are in the early stages of the boom and that the equity market will not peak until 2029-2030," Bartels wrote in a November note about her outlook for the year ahead.

No major investment firm is as bullish as Bartels. Wall Street is very excited about US stocks heading into the first year of Donald Trump's second term, but most strategists are calling for more tempered returns in the low-double-digit range.

A 'mountain' of cash will prevent another crash

Although a third consecutive annual gain of at least 20% for the stock market may sound outlandish or unrealistic, it wouldn't be without precedent.

Stock prices quadrupled in the 1920s prior to the Great Depression, but there are even more parallels between today's market and the late 1990s. The S&P 500 soared 34.1% in 1995 and didn't slow down, as it rose 20.3%, 31%, 26.7%, and 19.5% in the four years that followed. Unsurprisingly, the Nasdaq Composite also had an exponential gain.

What came next was the infamous tech bubble, which was the start of a so-called lost decade for US equities that culminated in the financial crisis. The first three years of the 2000s were marked by double-digit losses for the S&P 500, including an especially ugly 23.4% loss in 2003.

Bartels saw this dreadful stretch up close after joining Bank of America as an analyst in 1999. However, she firmly disagrees with the doomsayers who've drawn comparisons to that bubble, and she doesn't see a crash coming anytime soon.

"Equity markets peak when investors are all in and the markets are heavily leveraged," Bartels wrote in her note. "Today, there is $6.6 trillion in cash that we call the Money Mountain, and this mountain is still building. Investors are not all in."

Besides that dry powder, Bartels pointed out that investors aren't overly relying on leverage to add equity exposure, which can be a tell-tale sign of a bubble. And though valuations are rich by many measures, she doesn't think they're unreasonable, based on her analysis of long-term earnings.

"We don't have any measure signaling a major top in the market," Bartels wrote. "In fact, we have the complete opposite. We believe this cash needs to get deployed and leverage needs to build. If we are correct, this will drive equity prices to levels that are almost incomprehensible today."

The S&P 500 won't be in dangerous territory until it rockets to 10,000 or 13,000, Bartels wrote. By that point, the market will have more than doubled, and those who got out will have missed out on many more years of gains.

3 top ways to take advantage of a major boom

It follows that Bartels believes this once-in-a-generation surge will coincide with a robust economic expansion marked by healthy growth of earnings, profit margins, and productivity.

The best-performing assets in this environment next year will be stocks in cyclical sectors, rather than defensives, Bartels noted. Consumer discretionary stocks have outperformed their staples counterparts this year, as they have over the previous five, and the trend may continue.

Financials, which are now the market's top sector after a stunning 10.5% rally in November, are also one of Bartels' favored places to be in cyclicals. Banks and capital markets companies should benefit from fewer regulations and lower interest rates under Trump, the thinking goes. A steepening yield curve should also boost bank profitability.

But the best place to be in the coming years will be technology stocks, in Bartels' view. This sector, and those tied to it have dominated for most of the 2020s, including this year.

Tech companies have boasted far better returns on equity than their peers in the last 25 years, and the gap seems to be widening as artificial intelligence and blockchain build momentum, Bartels noted. To that point, cryptocurrencies have been on a furious rally since Trump's win, given the president-elect's new-found support for the technology.

While semiconductor stocks like Nvidia have been among the market's best for years, Bartels suspects that software companies will take over the sector in 2025.

So even though this market rally should march on with familiar leadership, investors shouldn't shy away from refreshing their portfolios heading into the new year.