Fed is cutting and probably will cut another 100~150 bps by end of 2025, no need to worry about when exactly they will cut, rather focus they are dovish
tax cuts are coming; Don’t know whether corporates will get 15% tax rate, but it is on the table
de-regulation, removing lot of regulatory hurdles and growth will be unleashed
Probably both wars coming to an end
What this means for 2026 is
tariffs increasing inflation
tax cuts exacerbate deficits, and bond yields moving up
trade war bringing lot of business uncertainty and hurting exports
crackdown on (illegal) immigration and any symbolic deportation will drive labor shortage and drive inflation further…
economic cycle will be so extended and economy, market correction
It doesn’t have to align with calendar year… but these are my initial thoughts. For now, stay invested, be prepared to change mind or have hedges in place to protect the downside.
Entering 2024, I expected Jan-Feb weakness on profit taking in the new year, it didn’t happen. But that doesn’t mean I should change. Keep expecting the same thing, some day it might happen.
Due to Washington state rule on long-term capital gain income tax (they call it as excise tax, and it is applied only for stock holdings, not on real-estate or other long-term gains) I have to take some profits this year. So I will not wait until next year. The post election rally, and expecting markets will rally into year-end, should help.
Never in my wildest dream, I was worried about taxes… always worried about not losing money. In a great market everyone, including a fool like yours sincerely, is a genius.
I think the tax bill details will be important. We will probably know more about Trump’s plan shortly but much depends on what he can get through Congress.
Stay tuned. Ditto border and immigration reform. Can he do the whole thing? Or only band-aids?
Next 4 years is going to have lots of headline volatility; Overall market volatility increase;
Ignoring headline is good for your health and for your portfolio
Policy choices have consequences; Some short term and some long-term;
Keep an eye on the interest rates; Either they are saying we are going to have higher growth or higher inflation; FED is cutting rates and treasury yields are going up;
UBER took a hit on the the new administration’s plan for autonomous driving cars, we all know the vaccine stocks, Pharma companies stock taking hit, and today there is a news about providing a free tax filing app, and promptly Intuit and H&R Block took hit.
It may seem just few companies here and there. But the incoming administration’s bark is loud and powerful. This is what I talked about be prepared for lots of headline volatility.
Policy proposals don’t have to work, if they create lot of volatility in the market, or gyrations of the price, there is an opportunity to make money. You could be get caught in the wrong way too. But volatility creates opportunity.
See here, there is a higher overall probability for positive return. Again, not in every instance it has ended… If you feel you need to hedge, do it, but don’t be very negative.
I am reading $BACs’ 2025 report (titled from 666 in 2009 to 6666 in 2025). Oh man, it is 110 page report. it just feels like it will be end of 2025 by the time I complete reading. Key themes
Large cap value over Index; Because Mag 7 overweight;
Banks benefit from M&A, lighter regulation, loan growth over cash return
SP500 $275 EPS;
OW financials, Materials, Real Estate, utilities and consumer discretionary
Couple of variants of the above I have seen elsewhere is consumer discretionary is just starting to outperform, Because of mag 7, equal weighted over SPY.
Trump’s announcement means that he intends to fire current IRS Commissioner Danny Werfel, as Republicans also contemplate rescinding as much of the Inflation Reduction Act funding for the agency as possible.
Many of the other IRS’s new initiatives, such as a free tax filing service offered by the agency, may also be in jeopardy under new leadership.
Santa rally fizzled. I am expecting, with the new year, the decline should start accelerate until Jan 17 option expiration. Lot of profit taking, rotating into different sectors, etc.
The S&P 500 closed 2024 up 25% on a total return basis, and +58% over two years… The equal-weighted S&P 500 lagged, +12% in 2024 and +28% the last two years… just 30%/27% of stocks outperformed
the S&P 500 in 2024/2023
Few random thoughts are:
There are large number of stock that can continue the rally
Alternatively, Mag7 may underperform, thus Index, but lot of individual stocks and some sectors could outperform… the old adage of “there is always a bull market somewhere”
They tell us this is about worries about rising interest rates. But of course tax loss selling is over. So some are restocking. And some deferred taking profits until the new tax year.
And then we have “experts” telling us Nvidia and Palantir are overvalued. And maybe some decide to sell. (I sold Palantir with a nice 100% gain. Time to take profits on weakness.)
So I sold some naked $90 calls and the stock continued to move and took some losses and rolled it to this year and mostly closed the position. But missed the big move from $30… I strongly want to shot the stock, at least I want to buy some puts, but the premium is so high…
CNBC reported a service thought fair price for Palantin was 60. And price fell from 80 or so.
Has AI component and good growth prospects but seemed to become a momentum play. PE driven too high. So correcting. Don’t know if i will buy it back. Keeping an eye on it.
Ditto CAVA. Also sold for a gain after momentum carried PE too high. Did ok but should have caught sooner.
Momentum stocks can be profitable but need to keep an eye on them.
@Kingran , Hi Kingran, happy new year. Thanks for this thread…Wanted to see how you all would would navigate 2025. Obviously, we have no idea how the upcoming Friday jobs report will be, but if it results in a nasty reaction with say SPY/ QQQ down 2%, what would you plan to do?.. Assuming you do nothing, what would be your game plan for the rest of 2025, if these were your core long term portfolio ( I know, the paradox of saying “Core long term” and asking what you will do for the short term, but trying to assess if 2025 will be a nasty 2022 or something worse like the bear markets of 2000s/2007 or a gift in hindsight like Aug 2024). Thank you!
I don’t have any specific plan for Friday job report. Same for the full year. I like Financials, specifically (C, WFC) and tech. Lot of individual names I am looking into and posting here.
On my “core” portfolio, come Jan 17th, lot of covered calls’ will be assigned and will have some cash, that I have to deal with. On trading account similarly lot of options will expire and have to think. For now, on trading account I have some SPY shorts, so not too worried about market reacting on Jobs report.
