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The SMP last year did twenty five percent, and twenty twenty three it did twenty six percent, So back to back twenty five percent years. Now, you know how many times in history the S and P has done over twenty percent three years in a.
Row, very rare, the late nineties out, which is my start in the business.
I can't think of another example.
One, yeah, exactly, one time ninety five, ninety six, ninety seven, one time in history that it's ever done that. And then presidential cycles. The first year of a presidential cycle usually is a weak market. The second year is a bad market, third year is a great market, in the
fourth year is a good market. Okay, So that those two things that I just named are not good for the market in twenty twenty five, But we also have a historical presidential cycle, historical presidential candidate that has been elected. It's a lot of things that traditionally might might not have happened that can happen this year. But history would point that this would be a down year in the market, or at least a down year compared to the last two years. What are your thoughts on that?
So I think I think it's it's too complex to take you know, three or four historical examples that we have, because guys keep in mind, like we're not playing with a thousand years worth of data. We're playing with We use CRISP database, so we have like one hundred years. We have ninety nine years worth of stock market data
that we would consider it to be reliable. When you see people do studies on stock market performance, most of those studies start in nineteen twenty six, because that's like where the reliable data that we have on stocks really starts.
You'll see a lot of studies begin in nineteen fifty nineteen fifty, which is the earliest that we can really take like S and P five hundred data, So we I just I would say, we don't have a big enough sample set to know that the presidential cycle or the amount of years with back to back double digit returns are enough to make a definitive statement. But I don't ignore it, and I'm with you, guys, It's definitely something to be aware of. There's a couple of distinctions here, though.
The first is the FED is easy. We're in the first ball markets that's ever started while the FED was raising rates.
I don't know. I don't know if you know that.
So like, it's a really unique situation that we're in, and we don't know how many FED rate cuts there will be this coming year. I think the market is forecasting two or three. Let's assume it's just two. They're not raising rates. We don't think they're going to have
to raise rates. The labor market slack that we now have the amount of people who are having difficulty finding the job, credit card delinquency rates, all of these things are taking higher, which I think keeps the FED from scaring the market about you know, staying high or raising. So now we know we're getting cuts, we just don't know how many, and we don't know what the timing will be, so that throws a wrinkle in that. The
second thing is that are growing. We should see eight percent earnings growth this year.
It would be pretty rare.
To find ourselves in a in a bear market so long as the feed is cutting and earnings are growing.
So I think it's I think it's not going to be simple.
This particular president wants to make a lot of noise about tariffs. He kind of wants to have a clean slate with all of our trading partners and start over as though there are no presidents and just like see what he can get so that he can tweet about it like it's.
A whole different world.
I think the tariff announcements are going to introduce more volatility in the first quarter of this year. So I use the term landmine potential landmine before about in video's earnings call. Another potential landmine is how vocal Trump wants to be about tariffs, even if they don't start implementing them in the first couple of months, just talking about it. I think if you look at twenty eighteen could definitely introduce some volatility.
So you think it's gonna be a good year for the market, I do. Look, I I mean, I'm with you. I just I just I'd like to just have you know, play Devil's Advocate on this situation.
Yeah, I'm with you, guys. And and you know, for the last fifteen years, I've been reading about the recession that's coming. We've we've been in recession two months out of the last fifteen years.
I don't know if most of the viewers even realize that.
But it's also been unprecedented amount of money that's been printed.
But that's not the whole time I'm saying fifteen years.
So look, if if if we say, if we say, right now, here are the big pieces to the puzzle s and p earnings growth that we think is coming. We think about eight percent tech it'll be a huge contribution to that.
But so what.
And then we think the FED is probably cutting twice, maybe even three times. By the way, if the economy gets materially worse, that number could be seven times. There, you got ten FED meetings this year, nine FED meetings this year, So like those things are in our favor. What's working against us is a very volatile administration that likes to throw out a lot of ideas, some of
them they don't even follow through with. So I think like the right way to phrase how I feel about this year is I'm bullish with the expectation of these bouts of volatility. Now I also reserve the rights change my mind. If these technology companies start warning and lowering guidance, all bets are off. We're at twenty one times earnings. The only way you stay at twenty one times earnings, which is substantially elevated relative to history, is if the
news flow stays good. You ain't keeping that multiple. If the biggest companies in the index start telling you, okay, things are still good, they're just not great. So there you could a situation where earnings grow but the stock market is flat or down because we get multiple contraction and people are just will less willing to pay up for the earnings that actually materialize. So I try to give people both sides and not just present here are all the reasons to be invested and not worry.
I think you should be invested, but also you could worry a little bit. That's okay too, that's healthy. Yeah, also really quick?
Can we tell them that twenty five percent should not be the expectation for any X.
If we do fourteen, I think we're happy. You know, seven to twelve is.
A nor If I sat you down at the end of twenty twenty one and I said, I don't make a deal with you for the next three years, one year the S and P will be will close down twenty percent, one year up twenty seven, one year up twenty five. I can't tell you the order. Would you sign up for that? You probably would sign up for that. Most people would. Well, that's what we just lived through.
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