Is it Safe to Own U.S. Stocks These Days?

Alphabet (NASDAQ:GOOG) is a robust value bet, even after soaring 11% on the back of its quantum computing chip news.

The U.S. stock market just keeps finding ways to move higher. And though it would probably be a good idea to temper expectations for returns in 2025 (near-30% gains seem highly unlikely!), I don’t think that American stocks should be avoided, especially if you’re a stock picker who has a nose for value. Arguably, there are still some undervalued names to check out as you steer clear of crowded plays in favour of the ones that many may be neglecting.

In any case, the continued weakness in the Canadian dollar could make the U.S. market that much less attractive in the new year. Either way, I think diversification on both sides of the border remains key, regardless of what market strategists see up ahead. Either way, the price of admission has gone way up, and while a correction is sure to be a buying opportunity, I’m not so sure how long it’ll be before dip-buyers get one.

worry concern

Image source: Getty Images

U.S. stocks seem overheated versus Canadian stocks, but there’s still value out there!

In the first quarter of 2025, Trump tariffs apply even more pressure to the loonie as Canadians fear a potential nudge into a recessionary, inflationary, or even stagflationary environment. In any case, being too bearish in a roaring bull market may be a tad excessive. At the end of the day, the artificial intelligence (AI) boom and other positives may allow the current bull market to run higher for many years. That’s why cautious optimism trumps outright bearishness at a time like this.

So, in short, U.S. stocks are still fantastic bets. I also believe that Canadian investors should continue to diversify their portfolios with some of the names within the S&P 500. At the end of the day, corporate America could feel more of the AI tailwinds over the coming years as Canada looks to catch up. Now, that’s not to say U.S. stocks should be favoured over Canadian stocks. Rather, I think staying invested on both sides of the border for the long haul could prove smart, even if valuations and currency moves work against you.

In this piece, we’ll check out one U.S. stock that I believe is still worth going after as the S&P 500 climbs to greater highs to close off the year.

Alphabet

Enter shares of Google parent Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), which is fresh off an 11% surge in just two days following its quantum computer chip breakthrough. Indeed, it’s hard to say whether quantum represents the next big trend after AI.

Personally, I think quantum is at least a decade away from coming into its own. Regardless, Alphabet has a plan to advance research within the industry. And if you’re planning on staying invested for the next decade or two, it’s hard not to be excited about the profound technologies brewing behind the scenes of the search giant.

Additionally, the firm recently launched Gemini 2.0, which may help Google gain some ground on ChatGPT. Indeed, Gemini is a powerful AI product that has a chance to gain ground as Google continues hitting that AI accelerator going into 2025. Though an 11% pop in two days is excessive on a development that’s more material to the extremely long term (don’t expect a quantum computing boom overnight), I still think GOOG stock is a value play at just north of 26 times trailing price to earnings.

In 2025, I’d look for Alphabet to become one of the better-performing Magnificent Seven stocks as the multiple expands in a way that better reflects the firm’s profoundly powerful technological advantages.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Alphabet. The Motley Fool has a disclosure policy.

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