What We Expect for 2025 - 12/16/24

In this episode of Paramount Wealth Perspectives, host Chris Coyle and Chief Investment Officer Scott Tremlett dive into the key events shaping global markets. They discuss last week’s mixed market performance, the S&P 500’s first weekly drop since mid-November, and how stretched valuations and inflation data are driving cautious market sentiment ahead of the Federal Reserve’s highly anticipated rate decision.

Scott offers insights into 2025 market predictions, including the disparity in analyst expectations, improving sentiment, and record household wealth. While some foresee volatility and potential double-digit gains, Scott shares his balanced outlook, emphasizing the importance of forward-looking fundamentals and opportunities to reduce risk later in the year.

Looking ahead, the episode highlights upcoming events such as the Fed’s policy announcement, retail sales, housing data, and global monetary policy moves from the UK, Japan, and more. Tune in for a comprehensive breakdown of the latest market trends and what to watch in the week ahead!

Transcript

Chris Coyle: 0:00

Intro song game on. Hello, everyone. Welcome to paramount wealth perspectives. Your go-to podcast for the latest updates on global markets and current economic events. This is your host, Chris Coyle. Each week we strive to bring you expert analysis on market trends, economic shifts. And key financial developments from around the world. Whether you're an investor business leader. Or simply curious about the global economy. Our podcast is here to keep you informed and ahead of the curve. Now let's dive into the markets and explore what shaping the world of finance today. Here with us today. We have Scott Tremlett chief investment officer and managing partner at paramount associates, wealth management. Scott. Looking back to last week. What are some major events you would like to highlight?

0:59

Thank you, Chris. Last week, most major indices were lower. The Russell 2000 was the under-performer while the NASDAQ outperformed and was supported by big tech. It's been an interesting two weeks and Friday was the 10th straight session where more S and P 500 stocks actually declined. Then advanced. This was also the S and P first weekly drop since mid November. In fact, the Dow Jones industrial average as a Friday has dropped seven straight days. The dollar strengthened for the week and gold was up marginally. The defensive tone of the markets may be stemming from stretch valuations. That means that prices have risen faster than actual earnings growth. But the market seemed to be waiting for the federal reserves announcement on rates this Wednesday. The market is now pricing in nearly a hundred percent odds that the fed will lower rates by a quarter point. Odds increased after consumer inflation was in line with expectations. Well, inflation did rise quicker. Than in the past four months and the year of a year figure did see a slight uptick. The most notable highlight was the deceleration in shelter inflation. Turning to producer inflation. The producer price index did increase by more than expected. Both the month over month and the year of a year numbers came in hotter than first anticipated. We also saw small business sentiment, jump. The NFI B small business sentiment index posted its biggest monthly gain on record in November. And best print since 2021. Snapping a 34 month streak of record high uncertainty. Elsewhere. China pledged more support to their economy. And South Korea is parliament voted to impeach their president. Following this unexpected declaration of martial law. Thanks Scott, it's fascinating to see how mix economic signals. And global developments are shaping market sentiment. Ahead of the feds, highly anticipated rate decision this Wednesday. What are you hearing about expectations for price targets around the us equity markets? Everything I'm reading these days, Chris. Includes an expert opinion for 2025. And the targets are in for most large firms and there are wide variety of opinions. I think much of the disparity stems from the unknowns of tariffs. Deportation and immigration. Taxes. And potential deregulation. Keep in mind, the S and P 500 is now up over 70% since it's October 20, 22 low. Those analysts expecting markets decline in 2025 point directly to valuations and one research department, warns of a quote unquote. Major global trade war. Pushing markets down some 25%. Now that one report is an outlier to the downside. However, we really don't know what is going to happen. With policies, markets or economics. Until it really happens. Well, Scott, you make it clear that the uncertainty around policies and global dynamics is driving a wide range of market predictions for 2025, which to me highlights just how critical active management will be. Can you please explain what is contributing to these expectations? Or if there are any positives. We've gone through some of the negatives, Chris. But those analysts with a positive outlook for markets next year, see corporate profits jumping, double digits revenues increasing in a rise in animal spirits. Let's not forget that us households are sitting on record wealth. Of nearly$165 trillion. And at the same time, overall sentiment is improving. Two major firms just updated their expectations for 2025 from ending the year in the red. To expecting double digit gains for the us stock market. The consensus is for increased volatility during the year. And there are several reports illustrating a great first half of the year. Possibly overshooting to the upside. And then for the market to give back some of the gains in the latter, half of the year. That makes sense, Scott, and it's interesting to see how improving sentiment and record household wealth. Are driving more optimistic forecast. Though the expectation of increased volatility. Underscores the need for cautious optimism heading into 2025. Now, where do you stand on these different targets? Chris. My opinion. Is somewhere in between both extremes. First. Let's keep in mind that industry analysts on average have overestimated market gains by almost 7% per year. During the previous 20 years. If I take that number into consideration markets should only be up two to 3% next year. Looking a little further under the hood. Analysts overestimated the final value 13 of the last 20 years. Uh, leaving seven years, the analyst underestimated markets. It's interesting that analysts have underestimated the final value in four of the past five years. What does all that mean to me? Not much, really. Those that know me, understand that I'm always forward-looking. And what happened last time? It doesn't hold much weight to me. So for me, what do I expect in 2025? I believe that we will see positive markets. I believe broad markets will be up over 5%, but will not end the year in double digits. I do believe that there is something to be said for a stronger first half of the year. And I also believe that there will be an opportunity next year. To outperform by reducing risk. After the animal spirits. Begin to fade. I'm with you on this Scott. While history provides some perspective forward-looking fundamentals matter most. And a positive, but modest market gain with opportunities to reduce risk later in the year. Sounds like a very balanced. And realistic outlook. So, what are you most interested in this week? This week, the big event of the week, Chris is the federal reserves announcement on Wednesday. I think they will cut this week. I do agree that there is a case to be made to not cut rates this week. Although markets are expecting it. And considering we are at or near all time highs. The markets need the cut this week. What the fed says about the path going forward will be the market moving news this time around. Personally, I think they should Telegraph less cuts for next year. As the economy continues to run strong. Inflation seems to be sticking around. And it has come down. But the next leg down may take more work than what was needed to get us to where we are now. Outside of this, we have the ever important retail sales in the U S tomorrow. Along with industrial production and home builder sentiment. Housing starts and building permits are on Wednesday. Final third quarter GDP and existing home sales on Thursday and Friday, we had the Fed's preferred inflation gauge PCE. Along with the university of Michigan's consumer sentiment report. Uh, overseas, we have the bank of Japan's rate announcement on Thursday. Where they are expected to hold rates. We also have the UK, Sweden, Mexico, Norway, the Philippines and Taiwan. Announcing monetary policy moves. Us earnings are light this week. But we have FedEx, Nike and Accenture on Thursday. Well, we will certainly have to keep on the lookout for those reports and trends. And I'm sure we will have plenty to discuss next Monday. For now stay informed. Stay ahead. And join us next week for more key updates shaping the global economy. Thank you for tuning into paramount wealth perspectives. We hope you all have a fantastic week.