This is The Takeaway from today’s Morning Brief, that’s possible sign up to receive in your inbox every morning, along with:
On big negative days for the stock market or extended periods of sell-offs, it’s good to have a trusted playbook.
Think of it as a guide to maintaining your sanity amid the chaos and, hopefully, keeping your portfolio full of long-term gains.
To me, the sell-out playbook is a two-pronged exercise honed through years of covering business news.
First, have a chat with the smartest people I know in the markets and business. What do they do and say, and why? Do they sound or look anxious?
And second, think carefully about whether anything has really changed in the market, or whether investors are panicking at the splashy headlines.
Suffice it to say, I had to dust off this sellout playbook this week. The Final Assessment: Relax, folks, this isn’t the start of a bear market, even if the tape feels punishing.
Why, you ask?
Many of the smartest people in the room have valid reasons, so to speak, to remain long stocks AND the economy isn’t falling off a cliff AND we’ll probably still get rate cuts in 2025 AND we have a pro-business president of Trump who will take office in less than a month.
“The big picture, with record profits, record profit margins, strong productivity and overall improving sentiment among consumers and small businesses, it’s hard to think this bull market is over,” Carson Group market strategist Ryan Detrick told me.
Keith Lerner, Truist’s co-chief investment officer, said: “The bull market is still intact, but we see a gut feeling in the near term.”
A gut check, indeed.
The Dow Jones Industrial Average promptly ended Wednesday’s session with a loss of more than 1,100 points. Things recovered slightly on Thursday, but selling pressure increased again on Friday.
The index of 30 well-known stocks such as Salesforce (CRM) and Disney (DIS) fell almost 4% in December as losses began to pile up amid renewed uncertainty about interest rate cuts.
The S&P 500 is down 3% this month. Market leader Nvidia (NVDA) fell 6% in December.
What has spooked markets is the Fed’s failure to commit to aggressive rate cuts by 2025.
The consensus among Fed officials is now for two rate cuts next year, down from four previously forecast in September, as the monetary policy body remains concerned about the inflation outlook. The inflation outlook is further clouded by possible steps by the new Trump administration, such as possible inflation tariffs on China.
‘I don’t see many [economic] red flags. People are cautiously optimistic about owning a business, whether it’s small, medium or large,” San Francisco Fed Chair Mary Daly said on Yahoo Finance’s Opening Bid podcast.
But again, nothing I’ve heard from Daly suggests she’s concerned about the US demand outlook, despite inflation being more persistent than she and other voting Fed members would like.
“The Fed has been aggressive, but I think people are overthinking it by assuming the rate cuts are over – that’s not what Powell said (plus he just gave markets 100 basis points of easing in 2024),” he said. Tom Essaye, founder of Sevens Report Research.
“I think 2025 could get off to a bit of a bumpy start as Washington may be a bit dysfunctional (as we see now) and the Fed may not be as forgiving anymore, but I don’t think either will be fatal to the bull market unless we see the growth is starting to roll over.”
As for demand, all signs point to the economy continuing to do quite well and supporting strong earnings growth into 2025.
Nike (NKE) cited double-digit percentage growth in e-commerce on its earnings call this week ahead of Black Friday. The latest retail sales report was strong.
Salesforce co-founder and CEO Marc Benioff tells me he’s rapidly winning new AI deals just weeks after earnings releases.
The AI thesis remains intact and will likely be a key driver of earnings and valuation multiples in 2025.
“There are strong indications that this could be a difficult year – and possibly even a decade – for the stock market. I’ll be bold and say we’ll see the opposite. I have no doubt that AI will drive the stock market. Countries that take the lead in AI will see the fastest GDP growth, as well as significant improvements in living standards and their defense capabilities. And whoever leads with AI as a company will lead in their sector of their sector anyway,” former Cisco (CSCO) CEO John Chambers highlighted this week as one of his predictions for 2025.
So even though it looks like the market has changed this week, if you zoom in deeper, it looks like what drove the gains in 2024. Nothing lasts forever, and stocks don’t rise in a straight line – two sentences for living life and investing.
Three times a week I have insight-filled conversations and chats with the biggest names in business and markets Opening bid. You can find more episodes on our videohub or check your favorite streaming service.
Brian Sozzi is editor-in-chief of Yahoo Finance. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips about deals, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
