Latest / The Financial Exchange Show / The Nasdaq just hit 20,000 for the first time. Why are some predicting a rough 2025?

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The Nasdaq just hit 20,000 for the first time. Why are some predicting a rough 2025? · The Financial Exchange Show

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  Speaker 1: This is the Financial Exchange with Chuck Zada and Mike Armstrong.
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  Speaker 2: Chuck, Mike, and Tucker with you here, and we got
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  Speaker 2: a lot to get to today, so we're gonna get
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  Speaker 2: right into it, starting with this piece from MarketWatch that gosh,
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  Speaker 2: I know, Tucker just smiled when he popped this right
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  Speaker 2: at the front of the stack. Today, NASDAK reaches twenty
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  Speaker 2: thousand for the first time. Why that could spell trouble
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  Speaker 2: for investors in early twenty twenty five?
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  Speaker 3: Your thoughts, Michael, The same reason it could spell disaster
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  Speaker 3: for investors in twenty twenty five if it had reached
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  Speaker 3: nineteen nine hundred and twenty or twenty one thousand to ten.
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  Speaker 3: Twenty thousand, Folks, is a entirely arbitrary number. It is
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  Speaker 3: just an index that has reached a new number, and
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  Speaker 3: it is meaningless. It's meaningless when taken in and of itself.
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  Speaker 3: If you want to give me some interesting information, like
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  Speaker 3: when price to earnings ratios get to a certain level,
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  Speaker 3: here's how things go the next year, or something that
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  Speaker 3: would put any sort of statistical analysis behind this, I'd
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  Speaker 3: be happy to in certain opinion, but this is not
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  Speaker 3: even worthy of that.
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  Speaker 2: No, it really isn't it, Imray, And I just want
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  Speaker 2: to read a couple of quotes in here. This is
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  Speaker 2: from Richard Steinberg, who is the Colony Group's chief market strategist,
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  Speaker 2: and I quote, shiny objects are getting shinier ahead of Christmas.
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  Speaker 2: But I think we're borrowing from Peter to pay Paul
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  Speaker 2: and then not his quote. US stocks to historically tend
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  Speaker 2: to do well in December, especially in the second half
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  Speaker 2: of the month what's known as the Santa Claus rally.
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  Speaker 2: But Steinberg says he believes that quote returns from any
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  Speaker 2: kind of Nasdaq melt up at your end, just take
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  Speaker 2: away from the first part of twenty twenty five. So
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  Speaker 2: I did some extensive exhaustive research here, Michael, just to
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  Speaker 2: you know again, I put on my thinking cap. It
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  Speaker 2: was actually not exhaustive research. It was just looking at
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  Speaker 2: numbers for about three minutes. And here's what I found
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  Speaker 2: last year. And I'm using the S and P five
• 3:16
  Speaker 2: hundred just because honestly, the Nasdaq who cares like the
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  Speaker 2: S and P five hundred is the best broad benchmark
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  Speaker 2: for the United States that's widely known. December last year,
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  Speaker 2: the S and P five hundred made four point four
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  Speaker 2: to two percent. This is after it made eight point
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  Speaker 2: nine two percent in November. Really nice bounce back in
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  Speaker 2: November after some you know, early fall weakness. If you
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  Speaker 2: recall and then do you remember early this year, Mike,
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  Speaker 2: the first four days of January were down. Yes, I do,
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  Speaker 2: and the pass is being published. Oh my goodness, the
• 3:49
  Speaker 2: market's down the first four days of January. How bad
• 3:51
  Speaker 2: is the year going to be? Well, here's how bad
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  Speaker 2: the year is gonna be. If we take a look
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  Speaker 2: at market performance thus far this year, the S and
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  Speaker 2: P five hundred is up twenty seven percent without accounting
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  Speaker 2: for dividends. So it's it's been pretty pretty darn Tutin,
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  Speaker 2: it's been fine when we look at you know, some
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  Speaker 2: other data, hear. Okay, even the full month of January.
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  Speaker 2: Remember December and November were good last year. January finished
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  Speaker 2: up one point five, February of five point one, okay,
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  Speaker 2: was it was fine. Let's look at other years where
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  Speaker 2: we had a strong December. And again, I'm not looking
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  Speaker 2: at any kind of you know, extensive research. This is
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  Speaker 2: literally me looking at numbers. So let's go back. Remember
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  Speaker 2: December of twenty two not good. We actually lost six percent.
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  Speaker 2: Then the fall of twenty two was very choppy. But
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  Speaker 2: let's look at December of twenty one, Okay, s and
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  Speaker 2: P five hundred was up four percent, and change January
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  Speaker 2: of twenty two, SMP lost five percent. Is that because
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  Speaker 2: it borrowed from Peter to pay Paul? Or is it
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  Speaker 2: because hey, we started raising interest rates in the market.
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  Speaker 2: Finally was like, oh gee, this is gonna be a problem.
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  Speaker 3: It seems to me like per Steinberg, you know, genuinely
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  Speaker 3: borrowed money from Peter to pay Paul. And that's what
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  Speaker 3: he's worried about here, because the rest of it doesn't
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  Speaker 3: make much sense.
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  Speaker 2: It really doesn't. And again, you can kind of go
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  Speaker 2: back through the longer term track record of you know,
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  Speaker 2: different years, and again keep in mind, like most years,
• 5:17
  Speaker 2: typical monthly performance is like one to two percent, because
• 5:21
  Speaker 2: like there's just not that much that usually happens in
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  Speaker 2: any given month. But ultimately, there's no statistical evidence that
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  Speaker 2: if you have one strong month at the end of
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  Speaker 2: the year, you're going to start the year badly the
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  Speaker 2: next year.
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  Speaker 3: Yeah, and nor does he cite anything specific to say.
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  Speaker 3: And here's why, you know, stocks are floating up because
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  Speaker 3: of this reason, and that's going to go away in January.
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  Speaker 3: There's just nothing behind this other than some weird gut instinct,
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  Speaker 3: which I don't know what you should do about this
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  Speaker 3: man's gut instinct, because once again it's not as though
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  Speaker 3: this article goes and furthers. Oh and these are the
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  Speaker 3: track records of Steinberg's gut instinct calls on where markets
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  Speaker 3: are going to go on a month to month.
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  Speaker 2: Basis, And I bet if they did, it wouldn't look
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  Speaker 2: so good. I got another thing that I want to
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  Speaker 2: weigh in on that I've got a problem with in
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  Speaker 2: this piece. Please, it's maybe, I don't know, halfway two
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  Speaker 2: thirds of the way through. Finally, the potential for a
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  Speaker 2: strong dollar on the heels of Trump's America First agenda
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  Speaker 2: could weigh on earnings of big multinational companies in the
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  Speaker 2: year ahead, according to Steinberg. So this is Steinberg again.
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  Speaker 2: I'm whoever this guy is. I'm sorry that I'm ripping
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  Speaker 2: on him because like he can't defend himself. But again,
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  Speaker 2: he didn't write the article, so he said the stuff
• 6:37
  Speaker 2: he did, He said that it could weigh on the markets.
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  Speaker 2: So I went back and I pulled the performance of
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  Speaker 2: the US dollar during Trump's first term, just because I
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  Speaker 2: was like, hey, like, how did it do then? And
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  Speaker 2: here's what I found is that during the first year
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  Speaker 2: of Trump's full term, for first term, which was twenty seventeen,
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  Speaker 2: the US Index started at about one hundred and two.
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  Speaker 2: It's weighted against a whole big basket of currencies, that's
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  Speaker 2: how they do this. By the end of the year,
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  Speaker 2: it finished around ninety one and a half. So the
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  Speaker 2: US dollar declined relative to other currencies by around ten
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  Speaker 2: percent in the first year of the first Trump term. Mike,
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  Speaker 2: when we talk about what was you know, being discussed
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  Speaker 2: during that term. Were we having discussions about tariffs? Probably
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  Speaker 2: we sure were. Where we having discussions about tax cuts
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  Speaker 2: most definitely we sure were. Where Are we having discussions
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  Speaker 2: about immigration? Definitely? Sure were? And yet the US dollar
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  Speaker 2: declined ten percent relative to other currencies during that time period.
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  Speaker 2: By the end of twenty nineteen. Remember twenty twenty, we
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  Speaker 2: had the pandemics, So I kind of tossed twenty twenty
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  Speaker 2: out because all kinds of weird crap was happening. By
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  Speaker 2: the end of twenty twenty, the dollars sitting at ninety
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  Speaker 2: six relative too. Again about one hundred and two when
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  Speaker 2: when the term started. So even if you look at
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  Speaker 2: a three year period, the dollar fell by about five
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  Speaker 2: six percent during that time period. So I guess the
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  Speaker 2: thing that I'm looking at is, hey, where are the
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  Speaker 2: facts in evidence that incoming President Trump is specifically looking
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  Speaker 2: for a stronger dollar or that you think what he
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  Speaker 2: implements is going to lead to a stronger dollar when
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  Speaker 2: the facts that we do have an evidence about his
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  Speaker 2: first term don't show that that's actually what happened. Good question, Chuck.
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  Speaker 2: I again, I'm just looking at the data that's actually
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  Speaker 2: out there and trying to make heads or tails of this.
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  Speaker 2: So this gets filed for me as a piece where hey,
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  Speaker 2: look it, it doesn't mean anything. And if you're gonna
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  Speaker 2: wait for the next market Watch peats that quotes Richard
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  Speaker 2: Steinberg in order to decide what to do, who knows
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  Speaker 2: when it's gonna come. So yeah, this is one of
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  Speaker 2: those that got a little jammed up when I saw
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  Speaker 2: it this morning, but I appreciate Tucker putting it in.
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  Speaker 3: The stat I do I want to again repeat where
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  Speaker 3: we're going with this, because Chuck don't get me. Well,
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  Speaker 3: let me just ask you bluntly, I don't think I
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  Speaker 3: should take your comments here to say that you are
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  Speaker 3: outrageously bullish on the stock market or the Nasdaq or
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  Speaker 3: the economy come January of twenty twenty five. That's not
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  Speaker 3: the argument you're trying to make, is it.
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  Speaker 2: No. The argument that I'm trying to make is that
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  Speaker 2: when talking about what we expect the market to do,
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  Speaker 2: I think we have to actually look at things that
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  Speaker 2: are more concrete, first of all, than just hey, it
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  Speaker 2: passed some arbitrary threas like what if the NASDAK didn't
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  Speaker 2: pass twenty thousand? What if it gets stuck at nineteen
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  Speaker 2: nine ninety nine? Are we not concerned then? Couldn't tell?
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  Speaker 2: It just doesn't make sense to look at it that way.
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  Speaker 2: And the other piece is I think we need more
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  Speaker 2: humility because people try to you know, in the financial business,
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  Speaker 2: specifically the asset management business, it's hey, you know, if
• 10:08
  Speaker 2: I say this thing and generate a bunch of news,
• 10:10
  Speaker 2: and if I happen to be right, then people flock
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  Speaker 2: to me because you know, oh, I'm the one who
• 10:15
  Speaker 2: called this, or I'm the one who called that. And
• 10:19
  Speaker 2: anyone who's been in this business long enough knows that
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  Speaker 2: you're generally wrong about as often as you're right, and
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  Speaker 2: so I I just it bothers me when pieces put
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  Speaker 2: people up on a pedestal being like, well, this is
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  Speaker 2: what's gonna happen, and this is why you should be
• 10:37
  Speaker 2: nervous or shouldn't. Because the example that we covered was
• 10:39
  Speaker 2: from earlier this year where the first four days of
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  Speaker 2: the year were down and we had the pieces. Mike,
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  Speaker 2: We've got the receipts if anyone wants them. The pieces
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  Speaker 2: that were being written, Oh, January started badly. This means
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  Speaker 2: the rest of the year is going to go badly.
• 10:54
  Speaker 2: And quite honestly, if someone read that and made an
• 10:59
  Speaker 2: investment to see on what to do, yeah, they have
• 11:01
  Speaker 2: some personal responsibility to it. But places like the Wall
• 11:06
  Speaker 2: Street Journal in Bloomberg that actually published this stuff no better. Yes,
• 11:11
  Speaker 2: they should take a quick break here. When we come back,
• 11:14
  Speaker 2: I want to discuss a little bit of the economic
• 11:18
  Speaker 2: data that we got this morning. We got a couple
• 11:20
  Speaker 2: pieces that came out, and so let's discuss those when
• 11:24
  Speaker 2: we return.
• 11:26
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  Speaker 2: Mike, we got some economic data out this morning. Do
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  Speaker 2: you want to start with PPI or jobless claims? Let's
• 12:26
  Speaker 2: go to the jobless claims First. Everybody's been harping on
• 12:28
  Speaker 2: the labor market. Will it break? Will it not?
• 12:31
  Speaker 3: What did we see from our weekly filings for unemployment?
• 12:34
  Speaker 2: Second, meaningful move up in weekly jobless claims that we've
• 12:38
  Speaker 2: seen initial claims increase to two hundred and forty two thousand,
• 12:41
  Speaker 2: That is up from two hundred and twenty five thousand,
• 12:45
  Speaker 2: which was also revised up by a thousand. So you've
• 12:47
  Speaker 2: got a little bit of a trend here moving up
• 12:49
  Speaker 2: toward the mid two hundred thousands. Now, it still is
• 12:52
  Speaker 2: too early for it to mean anything, and there's also
• 12:56
  Speaker 2: some underlying data that if you look at in here
• 12:59
  Speaker 2: again probably too early to mean anything as far as hey,
• 13:03
  Speaker 2: the rate of continuing claims and the insured unemployment rate.
• 13:07
  Speaker 2: You've got a little bit of a break to the
• 13:08
  Speaker 2: upside on it again by like zero point one percent
• 13:11
  Speaker 2: relative to previous normal years of twenty twenty three, twenty nineteen,
• 13:16
  Speaker 2: and twenty eighteen. Those are the three most recent that
• 13:18
  Speaker 2: we can compare to, because twenty twenty through twenty twenty
• 13:22
  Speaker 2: two is just pandemic related mess YEP. So I think
• 13:26
  Speaker 2: if you look at this, it's something where you say, okay, like,
• 13:28
  Speaker 2: let's keep our intenta up on this, because if you
• 13:30
  Speaker 2: do get another two or three weeks of this kind
• 13:33
  Speaker 2: of data, and if that insured unemployment rate continues to
• 13:36
  Speaker 2: inch up faster than what we've seen in previous years,
• 13:40
  Speaker 2: remember there's a natural uptick that you see at the
• 13:43
  Speaker 2: end of the year in the not seasonally adjusted number
• 13:45
  Speaker 2: that you know that's the one that I'm watching just because,
• 13:48
  Speaker 2: especially this time of year, with the seasonal adjustments with
• 13:52
  Speaker 2: how Thanksgiving fell this year, they can be all over
• 13:54
  Speaker 2: the place, and we've seen that in this data. So
• 13:56
  Speaker 2: this is a report that to me, there's a chance
• 13:59
  Speaker 2: that this is just a bad report and that hey,
• 14:02
  Speaker 2: things are worsening. But I also think that we need
• 14:04
  Speaker 2: to be aware that there's some seasonal factors that could
• 14:06
  Speaker 2: be at play, and it's unclear if there's anything real
• 14:10
  Speaker 2: that's happening, but it's got my attention for the next
• 14:12
  Speaker 2: couple weeks now, because if that is the case, hey,
• 14:16
  Speaker 2: as you get past that weird seasonality associated with where
• 14:19
  Speaker 2: Thanksgiving fell this year, you should see these results start
• 14:23
  Speaker 2: to normalize a little bit in the next couple weeks.
• 14:25
  Speaker 2: And if we don't see that and they instead continue
• 14:27
  Speaker 2: to inch up, then we've got something that really bears
• 14:30
  Speaker 2: watching and is the first kind of real time sign
• 14:33
  Speaker 2: that we've had that there's a problem not just with
• 14:35
  Speaker 2: the hiring rate but potentially with employee retention heading into
• 14:39
  Speaker 2: twenty twenty five.
• 14:41
  Speaker 3: That seems remarkably similar to my own conclusions on inflation
• 14:44
  Speaker 3: over the last month or two, which is nothing five
• 14:48
  Speaker 3: alarm fire alarming, But if it should continue in the
• 14:54
  Speaker 3: direction it has at the pace it's going, then you
• 14:57
  Speaker 3: could be worried about inflation.
• 14:59
  Speaker 2: Again.
• 15:00
  Speaker 3: I know CPI came out yesterday. PPI out this morning
• 15:03
  Speaker 3: a little hotter than expected. Again, CPI at least was
• 15:06
  Speaker 3: in line with expectations, but I still had the same
• 15:08
  Speaker 3: conclusion that, hey, these numbers aren't great in terms of
• 15:11
  Speaker 3: what we're seeing.
• 15:13
  Speaker 2: And PPI came out today, as you mentioned, a little
• 15:15
  Speaker 2: bit hotter than expected on the headline point four versus
• 15:17
  Speaker 2: point two percent for the month. Core was in line
• 15:20
  Speaker 2: at point two. If you're not familiar with the PPI,
• 15:22
  Speaker 2: it's the Producer price index. It is the most useless
• 15:25
  Speaker 2: of all of the inflation indices. Even though it's a
• 15:29
  Speaker 2: producer price index, it does nothing to actually predict like
• 15:33
  Speaker 2: how margins are going to be for you know, companies
• 15:35
  Speaker 2: that have you know, these inputs and things like that.
• 15:39
  Speaker 2: It does not have any great read on what you
• 15:42
  Speaker 2: know you're gonna get in the future with inflation. It's
• 15:45
  Speaker 2: a highly volatile data series from month to month. The
• 15:48
  Speaker 2: only value that it has there are some components that
• 15:51
  Speaker 2: you can pass through from it into PCEE, which comes
• 15:55
  Speaker 2: out two weeks from now. And the one thing I
• 15:58
  Speaker 2: will say, the components that do pass through are to
• 16:01
  Speaker 2: me pointing to PCE coming in in a pretty good spot.
• 16:05
  Speaker 1: Uh.
• 16:05
  Speaker 2: And so I think, if you're looking at hey, what's
• 16:08
  Speaker 2: what's the read on this? My take is actually based
• 16:10
  Speaker 2: on what passes through from CPI and from PPI into PCE.
• 16:15
  Speaker 2: PCE is actually gonna come through in a pretty good spot,
• 16:18
  Speaker 2: I think. And that has me a little bit confused
• 16:20
  Speaker 2: as to why you've got the long end of the
• 16:21
  Speaker 2: yield curve selling off a little bit more today. But
• 16:25
  Speaker 2: again it these are one day fluctuations and rates and
• 16:27
  Speaker 2: it's like two bases points, so it's not anything you know,
• 16:30
  Speaker 2: huge that you're seeing. But I think the other thing
• 16:34
  Speaker 2: that I come back to is, look if if there
• 16:36
  Speaker 2: are labor market problems that are real for better, not
• 16:40
  Speaker 2: for better, for words for worse. One of the things
• 16:44
  Speaker 2: that happens when you see meaningful weakness develop in the
• 16:48
  Speaker 2: labor market, if that's what we're heading into, it generally
• 16:51
  Speaker 2: quashes any kind of inflation that's out there because demand
• 16:55
  Speaker 2: drops and so inflation simply is not maintained. That's the
• 16:58
  Speaker 2: whole premise of the FED raising interest rates. Is, Hey,
• 17:01
  Speaker 2: if we slow the labor market, the you know, the
• 17:04
  Speaker 2: next order there is, well, if people don't have as
• 17:07
  Speaker 2: much money to spend, inflation drops, and that's why the
• 17:10
  Speaker 2: Fed raises interest rates.
• 17:11
  Speaker 3: So we've talked at length about the unique challenges Donald
• 17:14
  Speaker 3: Trump faces when he takes office come January. And I
• 17:18
  Speaker 3: can't think of any more direct than some indicators on
• 17:21
  Speaker 3: the labor market that are showing signs of weakness, not
• 17:25
  Speaker 3: not uptick in unemployment yet, but you know, showing signs
• 17:28
  Speaker 3: of weakness in different areas depending on which data points
• 17:31
  Speaker 3: you're looking at. This weekly job as claims number is
• 17:33
  Speaker 3: one among many that are showing, you know, slowing signs
• 17:36
  Speaker 3: in the labor market. Inflation just not going away to
• 17:40
  Speaker 3: the point that the feder Reserve would like. It's probably
• 17:43
  Speaker 3: still not newsworthy at this point, just how long it's
• 17:47
  Speaker 3: holding on. But these are again immense challenges to deal
• 17:51
  Speaker 3: with because your typical, your typical set of tools to
• 17:56
  Speaker 3: battle a rising unemployment rate, at least in twenty twenty one,
• 18:01
  Speaker 3: created a whole bunch of inflation, and so you have
• 18:03
  Speaker 3: to you have to measure all those things and be
• 18:05
  Speaker 3: careful about what tools you employ.
• 18:07
  Speaker 2: Yeah, so it's again it's it's going to be a
• 18:10
  Speaker 2: different situation than he was walking into in his first term.
• 18:14
  Speaker 2: Where now about six six weeks away. Yeah, I think
• 18:17
  Speaker 2: six weeks away from the inauguration. So the good news
• 18:22
  Speaker 2: is then at that point we can get past like, hey,
• 18:24
  Speaker 2: what's gonna happen, Like, we're gonna see what happens then,
• 18:27
  Speaker 2: Because I I've said this before, we we just can't
• 18:31
  Speaker 2: have this long between the election and the inauguration, Like
• 18:36
  Speaker 2: we got to find a way to condense this. It's
• 18:39
  Speaker 2: it's twenty twenty five almost, Like you don't have to
• 18:42
  Speaker 2: travel by horseback from wherever you were to Washington, d C.
• 18:47
  Speaker 2: Anymore to assemble your staff. Yeah, we got planes, trains
• 18:51
  Speaker 2: and automobiles. Man like goes a lot faster. Let's let's
• 18:54
  Speaker 2: cut that, you know, pre inauguration period down from two
• 18:58
  Speaker 2: months to two weeks and call to day may even
• 19:00
  Speaker 2: give you three weeks if you want three, fine, but
• 19:03
  Speaker 2: quite honestly, like, look, you're running for president, you should fit.
• 19:06
  Speaker 2: You should know who your staff is going to be
• 19:08
  Speaker 2: going in right, Like so that hard to ask people
• 19:12
  Speaker 2: in advance.
• 19:12
  Speaker 3: I feel like the major objections that we have on
• 19:14
  Speaker 3: the Financial Exchange are to daylight savings time and the
• 19:17
  Speaker 3: time between election and inauguration. Well, we got a lot
• 19:23
  Speaker 3: of things to say, not many of them about finances
• 19:26
  Speaker 3: or economics.
• 19:27
  Speaker 2: Today. All I all I gotta say is, uh, it's
• 19:31
  Speaker 2: not my quote. I believe it's Delmore Schwartz. Time is
• 19:34
  Speaker 2: the fire in which we burn. Let's take a quick break.
• 19:38
  Speaker 2: When we come back, We've got a little bit of
• 19:40
  Speaker 2: Wall Street watch after this.
• 19:42
  Speaker 1: Like us on Facebook and follow us on Twitter. Act
• 19:45
  Speaker 1: TFFE show Breaking business news is always first right here
• 19:49
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:55
  Speaker 1: Street Watch a complete look at what's moving markets so
• 19:58
  Speaker 1: far today right here the Financial Exchange Radio Network.
• 20:02
  Speaker 4: One day after the Nasdaq hit twenty thousand for the
• 20:04
  Speaker 4: first time, Marcus today are dipping into negative territory as
• 20:09
  Speaker 4: investors sift through the producer price Index and jobless claims
• 20:13
  Speaker 4: data posted this morning. Right now, the Dow is off
• 20:17
  Speaker 4: by nine points, SMP five hundred is also off by
• 20:20
  Speaker 4: nine points, and the Nasdaq is down nearly a third
• 20:24
  Speaker 4: of percent, or fifty eight points. Of russ in two
• 20:27
  Speaker 4: thousand is down over two thirds of a percent or
• 20:29
  Speaker 4: sixteen points. A ten year treasure wheeled up by two
• 20:33
  Speaker 4: basis points at four point two nine percent, and crude
• 20:36
  Speaker 4: oil is off one and a third percent, trading just
• 20:40
  Speaker 4: above sixty nine dollars a barrel. Adobe shares down by
• 20:44
  Speaker 4: twelve percent after the software company provided a disappointing revenue
• 20:49
  Speaker 4: outlook for its new fiscal year. The company did, however,
• 20:52
  Speaker 4: beat earnings in revenue expectations for its fiscal fourth quarter,
• 20:56
  Speaker 4: but again, Adobe down by twelve percent on the day. Meanwhile,
• 21:00
  Speaker 4: after hitting an all time high yesterday, Tesla shares are
• 21:03
  Speaker 4: flat today. Elsewhere, shares in ride hailing and food delivery
• 21:07
  Speaker 4: company Uber bouncing back after yesterday's pullback, which was driven
• 21:11
  Speaker 4: by GM's announcement that it would scrap its cruise robotaxi program.
• 21:15
  Speaker 4: Uber is up three percent today. Bank of America upgraded
• 21:20
  Speaker 4: Constellations Constellation Energy to buy from neutral, with the bank's
• 21:24
  Speaker 4: analyst said Constellation was in the best position to benefit
• 21:28
  Speaker 4: from upcoming regulatory clarity coupled with increasing demand and tightening supply.
• 21:33
  Speaker 4: Constellation shares up by three percent. Shares and Celsius holdings
• 21:38
  Speaker 4: up over six percent after JP Morgan initiated coverage of
• 21:42
  Speaker 4: the energy drink maker with an overweight rating, citing lighter
• 21:46
  Speaker 4: inventory in a reacceleration in the energy drink category. And
• 21:52
  Speaker 4: after today's closing bill, we'll see quarterly results from Costco
• 21:56
  Speaker 4: and Broadcom. On Tucker Silvan that's Wall Street Watch, Mike.
• 22:00
  Speaker 2: We got a couple pieces here talking about the Fed.
• 22:04
  Speaker 2: Which one do you want to start with.
• 22:06
  Speaker 3: Let's just take a look here at you know, the
• 22:09
  Speaker 3: upcoming meeting and what some are expecting in terms of
• 22:13
  Speaker 3: rate cuts for next year. So first things, there's a
• 22:16
  Speaker 3: meeting next Wednesday. There is currently a ninety eight percent
• 22:20
  Speaker 3: chance that the Fed does indeed cut rates by a
• 22:22
  Speaker 3: quarter percent, and I think that's all backed up and
• 22:25
  Speaker 3: justified by the data that we're seeing this week. Inflation
• 22:28
  Speaker 3: is again stubborn, but not accelerating dramatically, and employment is
• 22:34
  Speaker 3: still a question mark, and so that seems like a
• 22:36
  Speaker 3: sure thing.
• 22:38
  Speaker 2: The question.
• 22:39
  Speaker 3: The point that the article is making here, however, is
• 22:42
  Speaker 3: with those conflicting different areas, you definitely can't rely on
• 22:49
  Speaker 3: a bunch of rate cuts next year. And in fact,
• 22:52
  Speaker 3: while I think this is pretty useless, the CME does
• 22:54
  Speaker 3: let you go all the way out to December of
• 22:56
  Speaker 3: next year and see where the bets are being placed.
• 22:59
  Speaker 3: The most common or the most likely outcome for the
• 23:02
  Speaker 3: Fed is for the rates by December of next year
• 23:06
  Speaker 3: to only be another half a percent lower than where
• 23:09
  Speaker 3: they will be by the end of this year. And
• 23:12
  Speaker 3: so I read into that as most investors are looking
• 23:15
  Speaker 3: at a very possible pause from the Federal Reserve in
• 23:19
  Speaker 3: terms of where rates go directionally next year.
• 23:22
  Speaker 2: The piece that I find interesting in looking at the
• 23:24
  Speaker 2: end of next year and where the market is projecting things.
• 23:29
  Speaker 2: It's got a ninety four point two percent chance of
• 23:32
  Speaker 2: interest rates of the Fed Funds rate being lower at
• 23:34
  Speaker 2: the end of next year than it is than it
• 23:36
  Speaker 2: will be after the December meeting that next week.
• 23:39
  Speaker 3: Which you would interpret that as a very low risk
• 23:42
  Speaker 3: of higher inflation, right.
• 23:45
  Speaker 2: Yeah, I mean yeah, It's got a five point seven
• 23:48
  Speaker 2: percent chance that the Fed holds rates completely steady through
• 23:52
  Speaker 2: next year, or at least that by the end of next
• 23:54
  Speaker 2: year the Fed funds rate is where it is at
• 23:56
  Speaker 2: the end of next week, assuming a cut, and only
• 23:59
  Speaker 2: a point one percent chance that the Fed funds rate
• 24:01
  Speaker 2: is higher at the end of next year. Now, again,
• 24:06
  Speaker 2: I think it's something whereas is my my predisposition is
• 24:12
  Speaker 2: to kind of look at different paths that things can
• 24:15
  Speaker 2: take and say not this is gonna happen or that's
• 24:19
  Speaker 2: gonna happen. But hey, these being mispriced as far as
• 24:22
  Speaker 2: the probability that they end up where they are. And
• 24:27
  Speaker 2: to me, the idea that hey, we're we're you know,
• 24:32
  Speaker 2: pricing in with almost complete certainty that rates are going
• 24:37
  Speaker 2: to be lower by the end of next year, that's
• 24:42
  Speaker 2: a tough one to get to, it is. And I'm
• 24:46
  Speaker 2: not sitting here saying, well, I think that, you know,
• 24:48
  Speaker 2: rates need to go higher next year. That's that's not
• 24:51
  Speaker 2: where I am. But a point one percent chance of
• 24:55
  Speaker 2: rates moving higher next year, I look at that, and
• 24:59
  Speaker 2: I don't know, so maybe there's a ten percent chance,
• 25:01
  Speaker 2: Maybe there's a fifteen percent chance something like that, you know,
• 25:04
  Speaker 2: where Hey it's not you know, meaningful now, but it
• 25:07
  Speaker 2: still should be larger than this, and it should matter.
• 25:10
  Speaker 2: That seems underpriced. And the fact that, hey, the Fed
• 25:14
  Speaker 2: is we're only pricing in you know, a five or
• 25:17
  Speaker 2: six percent chance that the Fed makes no moves next year. Yeah,
• 25:20
  Speaker 2: that probably seems a little underpriced to me me too.
• 25:23
  Speaker 3: Yeah, that's the one where I say, hey, that seems
• 25:25
  Speaker 3: like a one to ten ish chance. I think you're
• 25:29
  Speaker 3: a little bit further on that than I am, but
• 25:31
  Speaker 3: that to me seems like a one to ten chance
• 25:32
  Speaker 3: because I feel like, to me, there's almost very little
• 25:36
  Speaker 3: likelihood that the Fed ends up hiking rates. You know,
• 25:39
  Speaker 3: inflation would have to get pretty ugly, I think for
• 25:43
  Speaker 3: them to go and hike rates. But you know, if
• 25:46
  Speaker 3: we get a bunch of more inflation reports like the
• 25:47
  Speaker 3: one we're seeing right now, and that maintains itself or
• 25:50
  Speaker 3: it gets worse throughout the year, I think you're right, like, yeah,
• 25:53
  Speaker 3: the Fed might not hike, but they're probably sitting steady
• 25:56
  Speaker 3: right where they are, so yeah, I think the way
• 26:00
  Speaker 3: that I would read this is that investors aren't terribly
• 26:03
  Speaker 3: concerned about inflation, but they do see a tail risk
• 26:07
  Speaker 3: of unemployment worsening.
• 26:09
  Speaker 2: And yeah, I think if I'm looking at this and saying, okay,
• 26:12
  Speaker 2: like what's reasonable right now, I think maybe a ten
• 26:16
  Speaker 2: percent chance that rates go up next year, a twenty
• 26:19
  Speaker 2: five percent chance they don't move, and a sixty five
• 26:22
  Speaker 2: percent chance of cuts. Again, it's nothing huge, but it
• 26:25
  Speaker 2: still is. Hey, this market might be unprepared for potential
• 26:30
  Speaker 2: inflation stickiness that could stick around, and that's just something
• 26:34
  Speaker 2: that bears watching. The counterpoint to it is, hey, if
• 26:39
  Speaker 2: you are in fact seeing this, you know what's going
• 26:42
  Speaker 2: on in the labor market, morphing from a stagnation of
• 26:45
  Speaker 2: the labor market to a deterioration of it. Yeah, then
• 26:49
  Speaker 2: you're probably pricing this in right, and the magnitude of
• 26:52
  Speaker 2: cuts is probably under priced because you'd probably need more
• 26:55
  Speaker 2: than a couple. Yeah.
• 26:55
  Speaker 3: The last piece I'd saying that is this FED for
• 26:58
  Speaker 3: the last six years has had a predisposition for lower rates,
• 27:02
  Speaker 3: and I totally changing in twenty twenty five, totally.
• 27:05
  Speaker 2: This brings us to the next piece from Bloomberg because
• 27:08
  Speaker 2: it's about what's called the neutral rate for the Federal Reserve.
• 27:12
  Speaker 2: And the neutral rate is this hypothetical pixie dust version
• 27:16
  Speaker 2: of Hey, all else being equal, if you know what
• 27:21
  Speaker 2: is the FED funds rate at which the FED is
• 27:24
  Speaker 2: neither restrictive nor accommodative to the economy. It's basically, how
• 27:29
  Speaker 2: do we what's the rate at which the Fed is
• 27:31
  Speaker 2: having no impact? And it's impossible to ever know this
• 27:34
  Speaker 2: because quite literally, it changes from day to day, week
• 27:38
  Speaker 2: to week, month to month. It's never static. And so
• 27:42
  Speaker 2: this idea that hey, we need to you know, hunt
• 27:45
  Speaker 2: this neutral rate as if it's the holy grail and
• 27:48
  Speaker 2: the kei to you know, solving economics, I think is
• 27:53
  Speaker 2: pure poppycock.
• 27:54
  Speaker 3: I think economists could spend their time better elsewhere it.
• 27:58
  Speaker 2: Matters insofar as, Hey, we're trying to figure out what
• 28:01
  Speaker 2: the FED may do. But I don't think the FED
• 28:04
  Speaker 2: needs to focus so much on figuring out whether they are,
• 28:09
  Speaker 2: you know, exactly at neutral or exactly where they are
• 28:12
  Speaker 2: relative to it, because that gets into trying to manage
• 28:15
  Speaker 2: the economy month to month. And we've talked about how
• 28:18
  Speaker 2: like you you just can't do that and you shouldn't
• 28:21
  Speaker 2: do that for a whole host of reasons. So I'm
• 28:26
  Speaker 2: of the opinion, hey, find you know, an adequate range
• 28:30
  Speaker 2: where you think neutral is, look at it every few months,
• 28:34
  Speaker 2: maybe every year, and just as needed because otherwise, again,
• 28:40
  Speaker 2: how many like false cycles have we had in the
• 28:43
  Speaker 2: last two years where it's like, oh, we got three good,
• 28:45
  Speaker 2: good months of data on inflation, it's gone forever. Now
• 28:48
  Speaker 2: we got three bad months, it's back forever.
• 28:51
  Speaker 3: You're just gonna end up chasing your tail. You're you're
• 28:53
  Speaker 3: gonna be chasing your own tail around in circles.
• 28:55
  Speaker 2: Sure, it's look, it's it's great for you know, financial journalism,
• 28:59
  Speaker 2: because it's like, oh, like everyone's always freaking out about something,
• 29:01
  Speaker 2: but that's no way to live life or manage an economy.
• 29:06
  Speaker 2: It's I again, if ever, you know, appointed to be
• 29:12
  Speaker 2: the FED chair, which I never would be because I'm
• 29:15
  Speaker 2: grossly unqualified for it and probably disqualified based on my
• 29:20
  Speaker 2: previous conversation surrounding you know, the FED. I don't think
• 29:23
  Speaker 2: they exactly embraced me there. I would very much take
• 29:28
  Speaker 2: the Kunu approach from Forgetting Sarah Marshall. Do less, do less,
• 29:34
  Speaker 2: and when you do something, make it big. It's it's
• 29:37
  Speaker 2: kind of the speaks softly and carry a big stick
• 29:39
  Speaker 2: would be my FED approach. I'd be the Teddy Roosevelt
• 29:42
  Speaker 2: of FED governors, except without the mustache and I don't
• 29:48
  Speaker 2: know how to ride a horse. But other than that,
• 29:50
  Speaker 2: the same thing, basically the exact same thing. Let's take
• 29:54
  Speaker 2: a quick break here, and when we come back, we'll
• 29:57
  Speaker 2: talk about inflation from the perspective of the incoming and administration.
• 30:01
  Speaker 2: Trump administration has said, hey, we are going to be
• 30:03
  Speaker 2: able to end inflation. We'll talk about how they can
• 30:06
  Speaker 2: and whether or not it's possible.
• 30:08
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• 30:12
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• 30:16
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• 30:21
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• 30:24
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• 30:30
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• 30:41
  Speaker 2: Beach to the Wall Street Journal today, inflation is stuck?
• 30:44
  Speaker 2: Can Trump on stick it? And a quote from his
• 30:48
  Speaker 2: interview on Meet the Press on Sunday, he said, I
• 30:51
  Speaker 2: want on gceries and basically, hey, I want to be
• 30:54
  Speaker 2: able to get these prices down. The issue and one
• 30:58
  Speaker 2: that he himself addressed this morning. I don't know if
• 31:00
  Speaker 2: you saw Mike, but he ran the rang the opening
• 31:03
  Speaker 2: bell for the New York Stock Exchange. Saw that, and
• 31:06
  Speaker 2: they were interviewing him afterwards, and they were, you know, asking, hey,
• 31:10
  Speaker 2: you know, what is the deal? In so many words, hey,
• 31:14
  Speaker 2: what's the deal with inflation? Like are you going to
• 31:18
  Speaker 2: be able to deal with it? And I'm going to
• 31:20
  Speaker 2: use his own words here he says, quote, it's hard
• 31:23
  Speaker 2: to bring things down once they're up, you know, it's
• 31:25
  Speaker 2: very hard. So basically kind of admitting, Yeah, it's like,
• 31:29
  Speaker 2: prices don't generally go down, and when they do go down,
• 31:33
  Speaker 2: it's usually not for good reasons. If it's broad based,
• 31:36
  Speaker 2: it's usually because the economy is horrible.
• 31:38
  Speaker 3: Furthermore, even beyond that, let's say you did have the
• 31:42
  Speaker 3: perfect magic wand to fix inflation. We don't live in
• 31:45
  Speaker 3: a dictatorship. Like the role of the president in controlling
• 31:50
  Speaker 3: things like prices is going to be extremely limited in
• 31:54
  Speaker 3: any circumstance. So can Donald Trump try and get laws
• 31:58
  Speaker 3: passed that may effect inflation over the course of several years. Yeah,
• 32:03
  Speaker 3: I can think of a few, right, Like if you
• 32:05
  Speaker 3: do dramatically open up drilling and you know, deregulate that
• 32:10
  Speaker 3: area and cause oil prices to come down in some
• 32:13
  Speaker 3: meaningful way, obviously that you know goes right into prices.
• 32:17
  Speaker 3: You know, could there be some areas, specifically around housing,
• 32:20
  Speaker 3: where if you really put an effort forth to deregulate
• 32:24
  Speaker 3: those areas, could you see more development, more building.
• 32:26
  Speaker 2: Put into place.
• 32:28
  Speaker 3: Again, maybe, but does anything about that change prices in
• 32:31
  Speaker 3: twenty twenty five, The answer is pretty obviously know. And so,
• 32:34
  Speaker 3: as we commented over the last few years, are there
• 32:37
  Speaker 3: pieces of the Biden policies that contributed to higher prices. Absolutely,
• 32:44
  Speaker 3: was he solely responsible for twenty two prices increasing at
• 32:48
  Speaker 3: a rate of nearly ten percent? Also know, and so
• 32:52
  Speaker 3: whatever happens with this incoming administration too, I think we
• 32:55
  Speaker 3: have to temper expectations for what can actually realistically be done.
• 32:58
  Speaker 2: Like one another thing just to follow up on on
• 33:01
  Speaker 2: the inflation side is it's it's not as simple as hey,
• 33:06
  Speaker 2: if prices go down here, then inflation simply is going
• 33:09
  Speaker 2: to go away. Remember, prices of all kinds of goods
• 33:13
  Speaker 2: are always in flux. There's very rarely any time that
• 33:16
  Speaker 2: like everything's moving up all at once. It's it's you know,
• 33:20
  Speaker 2: coming from different areas at different times. But overall, inflation
• 33:24
  Speaker 2: is kind of the aggregate price level. And so what
• 33:27
  Speaker 2: you often see, just to use like right now as
• 33:29
  Speaker 2: an example, Hey, for the last year, gas prices have
• 33:33
  Speaker 2: been coming down, right we're sitting right now. The CPI
• 33:35
  Speaker 2: has them down like eight and a half percent over
• 33:37
  Speaker 2: the last twelve months right now. But you don't see
• 33:40
  Speaker 2: people saying, wow, like everything's fine because car insurance is up,
• 33:45
  Speaker 2: you know, more than twelve percent over that time. And
• 33:47
  Speaker 2: so what happens is that, Hey, if people do have
• 33:51
  Speaker 2: money that they save in one area, it's it's not
• 33:54
  Speaker 2: typical that they just say, hey, gee, I save this money,
• 33:58
  Speaker 2: you know, like I save three dollars up my tank.
• 34:00
  Speaker 2: You know what I'm gonna do. I'm gonna go and
• 34:02
  Speaker 2: buy a CD with that. More often than not, it's hey,
• 34:06
  Speaker 2: I've got an extra three dollars there. Now I can
• 34:09
  Speaker 2: you know, buy a little bit more at the grocery store,
• 34:11
  Speaker 2: and maybe grocery prices take up the mantle and those
• 34:13
  Speaker 2: start moving up instead. Or if grocery prices are down,
• 34:16
  Speaker 2: if egg prices are falling, someone might say, hey, gee,
• 34:20
  Speaker 2: now I you know, egg prices have fallen, and so
• 34:22
  Speaker 2: I saved eight dollars this month, and now I can
• 34:26
  Speaker 2: use that in order to you know, go at to McDonald's,
• 34:31
  Speaker 2: you know, an extra time a month. And so fast
• 34:33
  Speaker 2: food prices see a little bit of pricing pressure. So
• 34:36
  Speaker 2: it's not as simple with inflation as hey, if this
• 34:39
  Speaker 2: price comes down, like inflation's gonna come down. No, It's
• 34:43
  Speaker 2: it's this whole complex system. And I think that's something
• 34:45
  Speaker 2: that's important to focus on in that ultimately, what inflation is,
• 34:51
  Speaker 2: it's companies raising prices like, let's let's be just really
• 34:55
  Speaker 2: clear and basic and fourth grade about it. Inflation is
• 34:59
  Speaker 2: companies raising price. If one company in one area stops
• 35:03
  Speaker 2: raising prices, that doesn't mean that inflation is stopped. It
• 35:07
  Speaker 2: might just move somewhere else because now other companies can
• 35:09
  Speaker 2: raise prices more easily. And So when we look at
• 35:13
  Speaker 2: this and why inflation is so hard to get rid
• 35:17
  Speaker 2: of once it's there, it's because once you're kind of
• 35:21
  Speaker 2: even grudgingly used to paying higher prices, you know, prices
• 35:25
  Speaker 2: that are rising faster and faster, it's it's just mentally,
• 35:30
  Speaker 2: it's it's baked in. This is why inflation expectations matter
• 35:33
  Speaker 2: is because ultimately part of the reason where hey, you
• 35:36
  Speaker 2: go to Target and you're thinking about buying the tickle
• 35:38
  Speaker 2: me Elmo for your you know, your grandkid this year.
• 35:42
  Speaker 2: You say, gee, I don't even know how much of
• 35:43
  Speaker 2: tickle Maelmo costs now, like probably like forty bucks. I
• 35:46
  Speaker 2: don't know. You say, gee, I don't want to pay
• 35:48
  Speaker 2: forty bucks for it, but it's probably going to be
• 35:51
  Speaker 2: forty five next year, so I'll just do it. That's
• 35:54
  Speaker 2: what inflation expectations does to it. It gets people to
• 35:56
  Speaker 2: accept higher prices even if their finances are pressured, and
• 36:01
  Speaker 2: so there's no magic one that you can wave in
• 36:05
  Speaker 2: order to get rid of it. Historically, the only thing
• 36:08
  Speaker 2: that really gets that inflation expectations ruining a bunch of
• 36:12
  Speaker 2: people's lives. It is ruining a bunch of people's economics
• 36:14
  Speaker 2: lives through recession instead. Yeah, yeah, and i'd love to
• 36:18
  Speaker 2: that's why, Like, that's why Paul Volker raised interest rates
• 36:22
  Speaker 2: you know into the teens, was getting a hate mail
• 36:24
  Speaker 2: every day, but said I gotta do this because this
• 36:27
  Speaker 2: is the only way. Yeah, and it worked, but at
• 36:31
  Speaker 2: here it cost very unpopular, and uh, you know, we
• 36:36
  Speaker 2: look back now and say, gee, like that's what finally
• 36:38
  Speaker 2: did it. But any of you listening that lived through
• 36:41
  Speaker 2: that probably like, eh, yeah, kind of sucked. In nineteen
• 36:45
  Speaker 2: eighty one wasn't the best time to buy Well, actually
• 36:48
  Speaker 2: it was the best time to buy a house if
• 36:49
  Speaker 2: you can afford it, true, but most people couldn't because
• 36:52
  Speaker 2: you were paying eighteen percent on a mortgage and so
• 36:55
  Speaker 2: it was challenging. Let's take a quick break here. We
• 36:59
  Speaker 2: do still have quite a bit to go. As we
• 37:01
  Speaker 2: get into our two on the financial exchange, make sure
• 37:04
  Speaker 2: you stick around we got trivia coming up then as well.
• 37:07
  Speaker 2: In a bit