S&P 500 to Climb in 2025? ETFs to Watch for Next Year's Rally

Winning all seven swing states and a decisive majority in the 2024 election, Donald Trump secured a second tenure as the 47th President of the United States. The election results prompted a positive market response, with the S&P 500 gaining about 4.5% since the election results (as of Nov. 7).

The election results have sparked strong investor optimism, prompting analysts to raise their S&P 500 forecasts for the coming year, suggesting an accelerating and sustained bull run. According to Evercore ISI analyst Julian Emanuel, as quoted on Yahoo Finance, the S&P 500 will hit 6,600 by late June 2025, marking an around 11% rise from the current levels.

Emanuel credits the Trump administration’s focus on deregulating many industries as a potential driver for increased corporate profits.

The Bull Market Gets a Boost From Fed Rate Cut

In its recent FOMC meeting, the Fed cut the interest rates by 25 bps, bringing down the benchmark rate to 4.5-4.75%. With this being the second rate cut in seven weeks, the Fed cited a cooling jobs market and inflation moving toward the 2% target as the key factors behind the decision, according to Reuters.

Fed Chairman Jerome Powell, as quoted on Reuters, stated that the outcome of the Presidential election would not have a "near-term" impact on monetary policy.

According to the CME FedWatch Tool, the Fed has a 71.3% probability of lowering rates to 4.25-4.5%, while there's a 28.7% likelihood that they could remain stable at 4.5-4.75%.

ETFs to Explore

Below, we highlight funds for investors to capitalize on Donald Trump winning the election and the Fed slashing the interest rate the second time.

S&P 500 ETFs

Optimistic forecasts for the broad market index, hinting at a continuing bull run, makes investing in funds tracking the index an appealing investment strategy.

SPDR S&P 500 ETF Trust (SPY)

SPDR S&P 500 ETF Trust charges an annual fee of 0.09% and has Zacks ETF Rank #2 (Buy). The fund has gained 37.82% over the past year and 3.63% over the past three months.

Vanguard S&P 500 ETF (VOO)

Vanguard S&P 500 ETF charges an annual fee of 0.03% and has Zacks ETF Rank #1 (Strong Buy). The fund has gained 37.98% over the past year and 3.66% over the past three months.

iShares Core S&P 500 ETF (IVV)

iShares Core S&P 500 ETF charges an annual fee of 0.03% and Zacks ETF Rank #1. The fund has gained 37.97% over the past year and 3.66% over the past three months.

Nasdaq ETFs

The Fed's rate cut, combined with a tech rally driving the bull market, makes Nasdaq-focused ETFs appealing.Given that the tech sector relies heavily on borrowing to accelerate growth, lower interest rates create a cost-effective environment for obtaining additional funds to support further initiatives.

Invesco QQQ (QQQ)

Invesco QQQ charges an annual fee of 0.20% and has Zacks ETF Rank #2. The fund has gained 38.87% over the past year and 2.87% over the past three months.

Invesco NASDAQ 100 ETF (QQQM)

Invesco NASDAQ 100 ETF charges an annual fee of 0.15% and has Zacks ETF Rank #2. The fund has gained 38.99% over the past year and 2.89% over the past three months.

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)

First Trust NASDAQ-100 Equal Weighted Index Fund charges an annual fee of 0.57% and has Zacks ETF Rank #2. The fund has gained 25.82% over the past year and 0.70% over the past three months.

Small-Cap ETFs

As small-cap companies are more domestically tied, they are poised to outperform when the economy improves. Additionally, proposed corporate tax rate cut and deregulation would boost profits for smaller companies.

iShares Core S&P Small-Cap ETF (IJR) 

iShares Core S&P Small-Cap ETF charges an annual fee of 0.06% and has Zacks ETF Rank #2. The fund has gained 29.90% over the past year.

iShares Russell 2000 ETF (IWM)

iShares Russell 2000 ETF charges an annual fee of 0.19% and has Zacks ETF Rank #2. The fund has gained 33.88% over the past year.

Vanguard Small-Cap ETF (VB) 

Vanguard Small-Cap ETF charges an annual fee of 0.05% and has Zacks ETF Rank #2. The fund has gained 34.33% over the past year.

Growth ETFs

Investors can also explore growth ETFs without the constraint of a low beta. Growth funds typically excel during market uptrends, providing exposure to stocks with high growth potential. Growth investing prioritizes capital appreciation over annual income or dividends.

Vanguard Growth ETF (VUG)

Vanguard Growth ETF charges an annual fee of 0.04% and has Zacks ETF Rank #2. The fund has gained 44.03% over the past year and 4.44% over the past three months.

iShares Russell 1000 Growth ETF (IWF)

iShares Russell 1000 Growth ETF charges an annual fee of 0.19% and has Zacks ETF Rank #2. The fund has gained 43.58% over the past year and 4.58% over the past three months.

iShares S&P 500 Growth ETF (IVW)

iShares S&P 500 Growth ETF charges an annual fee of 0.18% and has Zacks ETF Rank #2. The fund has gained 43.40% over the past year and 4.38% over the past three months.

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