As one year moved towards its end, it is easy to look back and reflect on the ones that got away. Stock market stars this year include Palantir, a share I looked at in detail back in January. I did not invest but the share has since soared 358%!

With a new year under a fortnight away, my attention is turning to what opportunities the stock market might offer me in 2025.

Reasons to be cheerful in 2025

Could the coming year be a brilliant one for the stock market?

We have already seen the FTSE 100 index hit an all-time high this year. So too have the NASDAQ, S&P 500, and Dow Jones Industrial Average indexes on the other side of the pond.

Not only is there clear momentum, investor enthusiasm seems high and many businesses have been reporting strong performance in 2024. If those positive factors can continue, perhaps aided by improved economic performance in the US, we could see further stock market records shattered in 2025.

Warning signals flashing

Still, as billionaire investor Warren Buffett says, investors should be fearful when others are greedy. I think it is notable that Buffett has been selling tens of billions of pounds’ worth of shares this year.

What happens in the US economy and indeed the world economy remains to be seen. This year has seen an unconvincing performance in the British economy in my view. I could see us dipping into recession next year as easily as limbering up for a new growth spurt.

My biggest concern about the stock market as we head towards 2025 is valuation.

The Palantir stock price has surged, but it now trades on a price-to-earnings ratio of 385. Even allowing for potentially stronger earnings in future, that looks a lot like bubble territory to me.

What I’m doing before the year ends

The UK market looks less overvalued than its US counterpart in my opinion. But if the US sees a crash in 2025, I think the London market would surely suffer too.

I have been selling off some shares in my portfolio that I reckon look overvalued. But I have also been buying lately, as I continue to see some shares as bargains even as the market overall seems increasingly frothy to me.

That reflects my approach of buying individual shares rather than trying to “buy the market”, for example by investing in a tracker fund.

As an example, one share I purchased in the last month is JD Sports (LSE: JD).

The FTSE 100 retailer has had a tough year on the stock market, beginning with a profit warning in January.

It is down 39% so far this year and 40% over five years. Combined with a dividend yield of less than 1%, it may not look like a very attractive share to buy.

I do see risks here, such as the cost and execution risks of the company’s aggressive store opening plan at a time of weak consumer confidence.

But I reckon the current JD Sports share price could turn out to be a long-term bargain. Demand for sportswear is likely to remain high and the company’s global operation gives it economies of scale. It has a strong brand, large customer base and exciting growth plans.