By Ian Salisbury

With uncertainty over interest rates and stock valuations, 2025 could be the year of the market's forgotten middle child: mid-cap stocks. While mid-caps don't get much attention, the sector -- companies with market values between $2 billion and $10 billion -- may be in the sweet spot.

The large-cap S&P 500 index trades at nearly 22 times 2025 earnings, near a 20-year high; the iShares Core S&P Mid-Cap exchange-traded fund at 16 times. Analysts forecast 13% 2025 earnings-per-share growth for the ETF to the S&P 500's 14%. It's "mid-cap's time to shine," wrote BofA Securities recently, noting that mid-caps, with comparatively strong balance sheets, should weather rising rates better than alternatives like small-caps.

J.P. Morgan saw President Trump's tariffs lifting domestically focused companies, advantaging small- and mid-cap stocks relative to multinationals. One stock highlighted by J.P. Morgan is fruit company Dole, which trades at nine times 2025 earnings and, FactSet says, should grow earnings by some 15% this year. JPM cites the stock's 12% free-cash-flow yield and "rapidly deleveraging balance sheet."

Timothy Schwartz, co-manager of the Schwartz Value Focused fund -- Morningstar's top mid-cap blend fund in 2024, with a 39% return -- likes mid-cap outdoor-products maker Yeti Holdings, which had a big run after going public in 2018, then struggled. At 13 times 2025 earnings, it's "overlooked by the market," he says.

Write to Ian Salisbury at ian.salisbury@barrons.com

Last Week

Markets

The Trump inauguration moved inside the Capitol with Washington gripped by cold. A ceasefire began in Gaza, with the first hostage and prisoner exchanges. President Trump, who the weekend before launched his own meme coin (followed by the first lady) that sent crypto falling, signed executive orders, including a 75-day TikTok reprieve, tariff threats, pardons for Jan. 6 participants, ending AI regulation, demanding lower prices, and sending troops to the Mexican border. The dollar fell, then rebounded. Markets rose after the MLK break. The S&P 500 hit its first record high of 2025 on Thursday; shares fell on Friday. On the week, the Dow industrials rose 2.2%, and the S&P 500 and Nasdaq Composite gained 1.7%.

Companies

Apple fourth-quarter iPhone sales fell 18% in China. Trump presided over the announcement of a $500 billion AI infrastructure venture led by OpenAI, SoftBank Group, Oracle, and UAE-based MGX called Stargate; Elon Musk scoffed at the plan. The Financial Times reported that TikTok parent ByteDance would spend $12 billion on AI infrastructure this year. Moderna received $590 million in federal funds to develop a bird-flu vaccine. Netflix added 19 million subscribers in the fourth quarter.

Deals

Saudi Arabia's investment mining fund is set to buy 10% to 20% of Barrick Gold's $9 billion Pakistan copper-gold mine Reko Diq, from the Pakistani government....Italian bank Monte dei Paschi made a $13.9 billion offer for rival Mediobanca.

Next Week

Monday 1/27

A crowded earnings calendar is headlined by Big Tech reporting midweek. AT&T announces quarterly results on Monday, followed by General Motors, Lockheed Martin, RTX, and Starbucks on Tuesday. ASML Holding, Meta Platforms, Microsoft, and Tesla release earnings on Wednesday, while Apple, Caterpillar, Mastercard, and Visa follow suit on Thursday. AbbVie, Chevron, Exxon Mobil, and Novartis close out the week on Friday.

Wednesday 1/29

The Federal Open Market Committee announces its monetary-policy decision. The FOMC is widely expected to keep the federal-funds rate unchanged at 4.25% to 4.5%. With the economy and labor market still resilient, and inflation stubbornly above the Federal Reserve's 2% target, the central bank is in wait-and-see mode as it assesses incoming economic data.

Friday 1/31

The Bureau of Economic Analysis releases the personal consumption expenditures price index for December. Economists forecast a 2.5% year-over-increase, one-tenth of a percentage point more than in November. The core PCE index, which excludes volatile food and energy prices, is expected to rise 2.8%, matching the November figure.

The Numbers

$1.5 T

Global net inflows of exchange-traded funds in 2024, beating the previous high in 2021 of $1.2 trillion.

$4.15

The average retail price of a dozen large eggs in December, up 14% from November, 37% for the year.

$30 B

Redemptions made from climate-focused mutual funds last year, ending four years of increases.

$1.8 T

Amount of fees hedge funds charged investors since the industry began, 49% of total gains.

Write to Robert Teitelman at bob.teitelman@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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January 24, 2025 19:28 ET (00:28 GMT)

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