But things could improve in 2025. According to Charles Schwab, based on 14 interest rate cycles since 1929, the S&P 500 has generated positive returns 12 months after the first rate cut of the cycle 86% of the time. The benchmark index recorded negative returns after interest rate cuts in 2001 and 2007, mainly due to the recessionary environment.
In September 2024, the Fed began a sustained rate-cutting cycle by lowering benchmark interest rates by 50 basis points. Therefore, since the current economic environment does not appear to be recessionary, it would be wise to expect the index to continue growing until September 2025. Many analysts seem to agree with this prediction. UBS expects the S&P 500 to reach 6,400, while Oppenheimer Asset Management chief investment strategist John Stoltzfus expects the index to reach 7,100 in 2025.
Against this backdrop, it makes sense for retail investors to hold small positions in high-quality stocks taking advantage of secular tailwinds. That’s why the picks of these two companies fit the bill.
Oracle cloud services and licensing support revenue represents approximately 77% of the company’s total revenue. The cloud business is expected to generate revenues of $25 billion in fiscal 2025. Oracle’s prominence in providing data center infrastructure enhanced with artificial intelligence (AI) is the key factor fueling the growth of its cloud business. Oracle’s cloud infrastructure is used by major AI companies such as Nvidia, Meta platformsAnd xAI, OpenAI, and Cohere to train their most important generative AI models.
Oracle is also focusing on improving the performance of its cloud infrastructure, and recently released the world’s largest and fastest supercomputer, which uses up to 65,000 Nvidia H200 GPUs. This performance advantage has made Oracle’s cloud infrastructure faster and cheaper than many competing infrastructure clouds, helping it win large AI training workloads. The company’s GPU usage also jumped a staggering 336% year over year in the second quarter.
Oracle distinguishes itself from many other cloud infrastructure players with its unique cloud architecture. The company has chosen a modular design approach where only six unified data racks are needed to build a cloud region that provides all services to customers. The company can easily expand data center infrastructure from 50 kilowatts to 1.6 gigawatts in line with demand, inexpensively and efficiently. The unification of racks and services also helped Oracle deploy automation tools effectively in its cloud infrastructure.
Oracle has also created a broad geographic footprint with 98 cloud regions. The company has multi-cloud agreements with Microsoftazure, alphabetGoogle Cloud, and AmazonAWS, which also gives customers high flexibility to deploy their systems in the cloud.
Admittedly, Oracle doesn’t appear to be the hottest stock on Wall Street. However, the company recently traded at just 8.43 times trailing 12 months sales – Better than the software industry average price-to-sales (P/S) ratio of 10.4. With multiples expanding in line with strong growth, Oracle could see significant share price gains in the coming months.
The second database specialist worth investing in is MongoDB (NASDAQ:MDB). Although the company easily managed to beat consensus revenue and earnings estimates in the third quarter of fiscal 2025, shares fell on unexpected news about the long-time company. CFO and Chief Operating Officer Michael Gordon leaves at the end of January 2025. The subsequent price correction has presented an excellent entry opportunity for retail investors.
MongoDB added nearly 1,900 new customers in a row and ended the third quarter (ending October 31) with a total customer count of over 52,600. Furthermore, the company served 2,314 high-net-worth customers (those generating at least $100,000 of annual recurring revenue) in the third quarter, up from 1,972 customers in the same quarter the previous year.
Atlas, a cloud-native, integrated suite of database tools and services, represents approximately 68% of MongoDB’s total revenue. Cloud platform revenues rose 26% year-over-year in the third quarter, driven by strong adoption by enterprises to manage mission-critical projects. Atlas served more than 51,100 customers at the end of the third quarter, up from more than 44,900 customers in the same quarter of the previous year.
MongoDB is focusing on reallocating some of its go-to-market resources from mid-market channels to large enterprise channels. While the reallocation of funds from the mid-market segment to the enterprise channel is expected to reduce the pace of direct sales customer growth in the short term, it should lead to increased revenue growth in the long term.
MongoDB uses AI tools and professional services to modernize customers’ legacy applications. Since many of these applications rely on relational databases, the company also deploys a relational migration tool to migrate them to the MongoDB platform (suitable for documents and other complex data structures). This update reduces the cost, time, and risk of data loss or corruption. Hence, MongoDB sees a strong long-term growth opportunity in the legacy application modernization market.
Finally, MongoDB is also poised to benefit companies that are increasingly focused on AI-powered applications, which often require querying complex and rich datasets. The company says its unified platform approach (combining source data, metadata, operational data, and vector data) outperforms using multiple complex databases.
Given the many growth tailwinds and strong financial position, a purchase of MongoDB now appears compelling.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Manali Pradhan He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, MongoDB, Nvidia, and Oracle. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.
History says the S&P 500 will rise in 2025. 2 of the best stocks to buy before that happens. Originally published by The Motley Fool
