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Speaker 3: The SMP last year did twenty five percent, and twenty
Speaker 3: twenty three it did twenty six percent, So back to
Speaker 3: back twenty five percent years. Now, you know how many
Speaker 3: times in history the S and P has done over
Speaker 3: twenty percent three years in a.
Speaker 4: Row, very rare, the late nineties out, which is my
Speaker 4: start in the business.
Speaker 1: I can't think of another example.
Speaker 3: One, yeah, exactly, one time ninety five, ninety six, ninety seven,
Speaker 3: one time in history that it's ever done that. And
Speaker 3: then presidential cycles. The first year of a presidential cycle
Speaker 3: usually is a weak market. The second year is a
Speaker 3: bad market, third year is a great market, in the
Speaker 3: fourth year is a good market. Okay, So that those
Speaker 3: two things that I just named are not good for
Speaker 3: the market in twenty twenty five, But we also have
Speaker 3: a historical presidential cycle, historical presidential candidate that has been elected.
Speaker 3: It's a lot of things that traditionally might might not
Speaker 3: have happened that can happen this year. But history would
Speaker 3: point that this would be a down year in the market,
Speaker 3: or at least a down year compared to the last
Speaker 3: two years. What are your thoughts on that?
Speaker 4: So I think I think it's it's too complex to
Speaker 4: take you know, three or four historical examples that we have,
Speaker 4: because guys keep in mind, like we're not playing with
Speaker 4: a thousand years worth of data. We're playing with We
Speaker 4: use CRISP database, so we have like one hundred years.
Speaker 4: We have ninety nine years worth of stock market data
Speaker 4: that we would consider it to be reliable. When you
Speaker 4: see people do studies on stock market performance, most of
Speaker 4: those studies start in nineteen twenty six, because that's like
Speaker 4: where the reliable data that we have on stocks really starts.
Speaker 4: You'll see a lot of studies begin in nineteen fifty
Speaker 4: nineteen fifty, which is the earliest that we can really
Speaker 4: take like S and P five hundred data, So we
Speaker 4: I just I would say, we don't have a big
Speaker 4: enough sample set to know that the presidential cycle or
Speaker 4: the amount of years with back to back double digit
Speaker 4: returns are enough to make a definitive statement. But I
Speaker 4: don't ignore it, and I'm with you, guys, It's definitely
Speaker 4: something to be aware of. There's a couple of distinctions here, though.
Speaker 4: The first is the FED is easy. We're in the
Speaker 4: first ball markets that's ever started while the FED was
Speaker 4: raising rates.
Speaker 1: I don't know. I don't know if you know that.
Speaker 4: So like, it's a really unique situation that we're in,
Speaker 4: and we don't know how many FED rate cuts there
Speaker 4: will be this coming year. I think the market is
Speaker 4: forecasting two or three. Let's assume it's just two. They're
Speaker 4: not raising rates. We don't think they're going to have
Speaker 4: to raise rates. The labor market slack that we now
Speaker 4: have the amount of people who are having difficulty finding
Speaker 4: the job, credit card delinquency rates, all of these things
Speaker 4: are taking higher, which I think keeps the FED from
Speaker 4: scaring the market about you know, staying high or raising.
Speaker 4: So now we know we're getting cuts, we just don't
Speaker 4: know how many, and we don't know what the timing
Speaker 4: will be, so that throws a wrinkle in that. The
Speaker 4: second thing is that are growing. We should see eight
Speaker 4: percent earnings growth this year.
Speaker 1: It would be pretty rare.
Speaker 4: To find ourselves in a in a bear market so
Speaker 4: long as the feed is cutting and earnings are growing.
Speaker 1: So I think it's I think it's not going to
Speaker 1: be simple.
Speaker 4: This particular president wants to make a lot of noise
Speaker 4: about tariffs. He kind of wants to have a clean
Speaker 4: slate with all of our trading partners and start over
Speaker 4: as though there are no presidents and just like see
Speaker 4: what he can get so that he can tweet about
Speaker 4: it like it's.
Speaker 1: A whole different world.
Speaker 4: I think the tariff announcements are going to introduce more
Speaker 4: volatility in the first quarter of this year. So I
Speaker 4: use the term landmine potential landmine before about in video's
Speaker 4: earnings call. Another potential landmine is how vocal Trump wants
Speaker 4: to be about tariffs, even if they don't start implementing
Speaker 4: them in the first couple of months, just talking about it.
Speaker 4: I think if you look at twenty eighteen could definitely
Speaker 4: introduce some volatility.
Speaker 3: So you think it's gonna be a good year for
Speaker 3: the market, I do. Look, I I mean, I'm with you.
Speaker 3: I just I just I'd like to just have you know,
Speaker 3: play Devil's Advocate on this situation.
Speaker 4: Yeah, I'm with you, guys. And and you know, for
Speaker 4: the last fifteen years, I've been reading about the recession
Speaker 4: that's coming. We've we've been in recession two months out
Speaker 4: of the last fifteen years.
Speaker 1: I don't know if most of the viewers even realize that.
Speaker 3: But it's also been unprecedented amount of money that's been printed.
Speaker 1: But that's not the whole time I'm saying fifteen years.
Speaker 4: So look, if if if we say, if we say,
Speaker 4: right now, here are the big pieces to the puzzle
Speaker 4: s and p earnings growth that we think is coming.
Speaker 4: We think about eight percent tech it'll be a huge
Speaker 4: contribution to that.
Speaker 1: But so what.
Speaker 4: And then we think the FED is probably cutting twice,
Speaker 4: maybe even three times. By the way, if the economy
Speaker 4: gets materially worse, that number could be seven times. There,
Speaker 4: you got ten FED meetings this year, nine FED meetings
Speaker 4: this year, So like those things are in our favor.
Speaker 4: What's working against us is a very volatile administration that
Speaker 4: likes to throw out a lot of ideas, some of
Speaker 4: them they don't even follow through with. So I think
Speaker 4: like the right way to phrase how I feel about
Speaker 4: this year is I'm bullish with the expectation of these
Speaker 4: bouts of volatility. Now I also reserve the rights change
Speaker 4: my mind. If these technology companies start warning and lowering guidance,
Speaker 4: all bets are off. We're at twenty one times earnings.
Speaker 4: The only way you stay at twenty one times earnings,
Speaker 4: which is substantially elevated relative to history, is if the
Speaker 4: news flow stays good. You ain't keeping that multiple. If
Speaker 4: the biggest companies in the index start telling you, okay,
Speaker 4: things are still good, they're just not great. So there
Speaker 4: you could a situation where earnings grow but the stock
Speaker 4: market is flat or down because we get multiple contraction
Speaker 4: and people are just will less willing to pay up
Speaker 4: for the earnings that actually materialize. So I try to
Speaker 4: give people both sides and not just present here are
Speaker 4: all the reasons to be invested and not worry.
Speaker 1: I think you should be invested, but also you could
Speaker 1: worry a little bit. That's okay too, that's healthy. Yeah,
Speaker 1: also really quick?
Speaker 3: Can we tell them that twenty five percent should not
Speaker 3: be the expectation for any X.
Speaker 1: If we do fourteen, I think we're happy. You know,
Speaker 1: seven to twelve is.
Speaker 4: A nor If I sat you down at the end
Speaker 4: of twenty twenty one and I said, I don't make
Speaker 4: a deal with you for the next three years, one
Speaker 4: year the S and P will be will close down
Speaker 4: twenty percent, one year up twenty seven, one year up
Speaker 4: twenty five. I can't tell you the order. Would you
Speaker 4: sign up for that? You probably would sign up for that.
Speaker 4: Most people would. Well, that's what we just lived through.
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