Mary Ann Bartels: Stocks, Bitcoin Poised to Keep Rallying in 2025
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Welcome to Barron's The Way Forward. I'm Greg Bartalus, and my special guest is Mary Ann Bartels, Chief Investment Strategist at Sanctuary Wealth.

And we're here to discuss her market outlook for 2025. And I'm genuinely chomping at the bit for this interview because Marianne was here a year ago. We did the market outlook for this year, and she was remarkably accurate. So I am super curious to hear her.

you know, what you see ahead. So first off, tell us a little about you, yourself, your firm, and then let's jump into the talking about the markets. So I'm Marianne Bartels. I'm the chief investment strategist at Sanctuary Wealth. We're an IRA platform. We're relatively new. We're about five years old and we have just over 45 billion in assets. And in terms of my career, I

I've been on Wall Street for about 40 years, and a majority of my career, at least half of it, was at Merrill Lynch. I want to first begin by mentioning, importantly, we're recording on December the 5th. There's going to be a little delay in when this runs. So all of the current percentages and market values that we're going to discuss are as of today, December 5th. Last year, it was about a year ago, we had a similar discussion, and you said at the time—

I still think technology is the leader for 2024. We think semiconductors continue to lead. AI is real. It's here. Magnificent 7 produced most of the earnings this year, et cetera. So right now, NASDAQ is up about 29% year to date. You said you think small caps can rally 20% from their lows. You were positive on banks, particularly regionals. You said they could go, from their lows, can go up 30. Russell 2000's up about 20%. Regional's up 27%.

And you were bullish on home builders. They're up about 25%. And you also were bullish on Bitcoin, which was a really fascinating call because at the time it was about $40,000, $41,000 per Bitcoin. And you said, if the SEC approves SpotBitcoin ETF, quote, you're going to see a rush to go through the door and I think you could hit an all-time high. Well...

Today, Bitcoin is at an all-time high. It's over $103,000 as I speak. So that's up about over 150% since last year. So that's kind of the big picture. I just wanted to put that out there. Now I will turn the mic to you and let's dig into what you see ahead in 2025. Oh, no pressure now.

Well, I think there'd be more if you were dead wrong. Then your back would really, I think you have less pressure given that. But anyway, I hear you. Well, thank you. I really owe it to my Aunt Bernadette. Her name was Bernadette Bartels Murphy. And she went to Wall Street in 1956. And she was the first woman on the trading floor at Ladenburg Thalmann. And she was my first mentor. And that's how I wound up coming to Wall Street.

And my major was economics and I loved doing the big macro theme. And I would go into her office and make my case. And then she said, Marianne, that's terrific. That's great. Now, how are you going to turn that and make money for your clients? And I think I look like a deer in headlights when she first said that to me. I said, I have to take this macro picture and make money for my clients? She said, yes, you do.

So she's the one that set me on the path. She was a technical analyst and she trained me in technical analysis. Also trained as a quantitative strategist. And I really take a blend of disciplines of fundamental, and I'm going to put quant into fundamental, and technical to come up with my outlook. And...

I don't really try to say something so it's startling, but what I'm about to say will be startling. But I'm not saying it to be startling. It's truly what I believe in. I really believe we're in the golden age of investing. And that was the title of my presentation for my firm back in October. My year ahead piece I called, "All That's New is Old." So what do I mean by those titles?

I really believed that AI was going to be transformative. And we're hearing a lot about that. But I also think blockchain is a very important technology. And something we're not even talking about because it's really not available yet is Web3, which is the next generation of the internet. So what's Web3? It's read, write, own. And I believe that we're in a cycle because what Ampy taught me is cycles repeat.

And a lot of people are talking about the cycle of 1995 to 2000 being similar today. I do agree with that. But I went back and I looked at 1925 to 1929. So what are the similarities? I find similarities. In the 20s, we created new technology. Now, we may not think of them as technology, a car, right? We went from horse to car. We had radio. We had railroad.

these were transformative for our economy. In 1995, you had computers, you were networking computers and you had the internet. And today we have AI, we have blockchain and we're going to have web three. And those will have, I believe, profound impact on the equity market. What I've studied in my 40 years is markets don't make a major peak until all investors are in

and the market is levered. And I find that through the New York Stock Exchange margin debt. We're not even close. So I believe between now and the end of the decade, we're still in a secular bull market. Now, my forecast for next year on the S&P is pretty aggressive at 7,200 to 7,400. We can get pullbacks. We can get 10% or 15% pullbacks here.

But I think the environment is still very bullish for the market to go up. But I also introduced a target for the end of the decade for the S&P between 10,000 and 13,000. And that's what I want clients and investors to focus on is that I believe between today and the end of the decade,

It will be one of the most profitable investment opportunities of our lifetime. What will bring about the end, first of all, in your estimation of this? I mean, what would be the catalyst for the good times ending? Well, because everybody's all in and it's levered and there's no more room to the upside. I think valuations will go to record all-time highs. I think we're going to pass peak valuations of 2000.

We'll never know exactly what that one or two things are in terms of the catalyst of a peak, but we always have something that happens that forms a peak within the markets. Markets have secular trends for 15 to 20 years. We started the secular bull market in 2013 for the S&P and 2017 for the NASDAQ.

So it would be about the right time to end the secular trend. And then we go into holding pattern, which we call a secular bear market. Markets will be trendless.

for 15 to 20 years. It doesn't mean that you can't make money. You just have to know where to be invested. And do you think when that would occur that commodities might, for example, take the lead? Because historically, sometimes they flip-flop and commodities are high, stocks won't be, and vice versa. It doesn't always neatly correlate, but that has happened.

I would say yes. And the fundamental reason why is I do believe we have switched from a deflationary, disinflationary environment to an inflationary environment. Now, the short-term cycle is for inflation to come down, but I do believe inflation will trend up again. And I do believe at some point we'll see 10% interest rates again.

But that could be 10, 15 years from now. But I do think the cycle is for rates to go higher. So yes, I think commodities can be part of the investment cycle going out into the next decade. Sticking more to the short term. So for next year, I believe you said that S&P, you think, could hit 7,200, 7,400, thereabouts? Correct. Okay. And then we're around 6,000 now. So I think that's roughly about a ballpark 20% gain.

Correct. So given that this year we're S&Ps up about, what, 25 plus, and the previous year we were up nicely too, that seems reasonable. I mean, it seems aggressive, but it's not also— It seems aggressive, but it's happened before. So when you study 1995 to 1999, we were up 20% or more five years in a row. But we had major corrections within the year in 97 and 98.

How do you see the market leadership next year? Do you think it's going to stay concentrated in technology, broaden out more? I mean, how do you... So the market's already broadened out. I think it continues to broaden out. I still believe that technology is the leadership. Last year, obviously, I like semiconductors. I don't dislike semiconductors, but they've had a great run. I think they can take a pause.

I think software is the leader going into 2025. Early in my career, I worked with a technology analyst and learned that there's a cycle to technology investment. You have the improvement in the chip, you create bigger storage, and then you have a software cycle. So I think we're going into a software cycle. In fact, it's already started to occur, I believe.

In terms of market cap, small caps have done quite well since the election. I think they've outperformed large caps. Do you see this more as a blip or a sustainable? What's your outlook on small caps? So we have something in small caps that's called the January effect, where they traditionally outperform in January, but you can get that outperformance starting in November. And I think that we're already in that January effect. On bullish small caps for the next

six to 12 months. I still think large cap, mega cap over the secular cycle are still leadership, but I do see investment opportunities right now in small cap. Okay. And comparing the relative...

attractiveness from an investment perspective of, let's say, the S&P 500, the NASDAQ, and the Dow. Which of those three indexes do you find most attractive, given your analysis? I still like the NASDAQ, and I've nicknamed it the digital index, right? So when you look at the components of the NASDAQ, it's still very technology or tech-related.

And I still think that that's the primary leadership that we're in. So I still believe the NASDAQ will be the leader here. Okay. Okay. And I assume the S&P would be your next favorite given that there's more crossover in the Dow third. Okay. Correct. Let's talk about...

You mentioned the productivity gains. I think everyone's wrestling with, is it that the benefits are going to more filter and sift through the economy? Or is it more that you invest in the companies that are creating it? Like, just tell me a little more about AI and the economy and how do you think the benefits will accrue to investors?

So, there's a couple of answers in there. One of them is we're already getting productivity gains in the sense that I'm even watching some of my colleagues use like a chat GDP and it's cutting down on their time significantly in terms of their analysis. It's not doing the analysis, but it's assisting in a great way doing the analysis. So, we're already starting to see early signs of productivity.

But I do believe that this is going to allow over time as our productivity increases, we're also increasing capex and spending.

And I also believe that this is going to allow our economy to continue to grow. What I really think is most important here is when you look at the country that's producing the majority of the technology in AI, it's coming out of the United States.

And so we are the hub. So for foreign investors, if they want to invest in technology, they have to come to the United States. So I assume that given that Europe, for example, will likely continue to underperform given their lack of exposure to that? I'm anticipating that they will continue to underperform. And I've been a dollar bull. So that's kind of like a...

And out of consensus, most people have been looking for the demise of the U.S. dollar. And actually, technically, it made a major breakout to the upside. And I think the dollar can remain either stable to higher, meaning that we're in a good stable range, or the dollar can go higher over time. I do believe over time the dollar goes higher. And that hurts a U.S. investor that's investing overseas because when you translate that back –

With the dollar stronger, you lose return. So I've been telling investors, because a lot of financial advisors do long-term asset allocation and have money overseas.

And what I'm telling them or suggesting is that they hedge part of that. And there are ETFs out there that assist them in hedging part of the currency. You have the dollar, let's say, going higher, but there's an interesting interplay here because rates, we're looking at the Fed directionally, probably next move we think cutting, even though rates have been bubbling up higher recently. And then you have concerns about the deficit. So there are all these timelines and contrasting forces. So how do you

unpack rates, deficit, inflation, all of that. So when it comes to the dollar, you have to look at what's happening to rates outside of the United States. And it's quite shocking how low European rates have fallen. They're close to like 1%. Rates are just collapsing overseas. So that helps the US dollar because we still, even though we're lowering rates, the spread is we still have very attractive interest rate.

Now, when it comes to the deficit, I can go back to college remembering professors debating, is a deficit good or bad? We've always been concerned about having a deficit, yet it's never significantly really impacted the returns to the market. I'm not concerned about the deficit. Why am I not concerned about the deficit? Because I believe we can fund it. And as long as we can fund the deficit,

then we're okay. The day you can't fund a deficit, that's a problem. But I'm also very intrigued with what the Trump administration looks like they will attempt to do in terms of creating a Bitcoin reserve if that happens.

I think that's a fascinating theory where you build a reserve in Bitcoin that eventually, not right away, could have the ability to offset the deficit. But I also believe, if I'm correct, about where AI and blockchain and Web3 are going, we're going to grow our economy. So you start growing part of out of the deficit. And that happened during the Clinton administration.

And that was the last time we were at a surplus. That's right. Strong dollar. Yep. Yes. So I think we can repeat that. Quick question about the Bitcoin Reserve. It's out there, talked about, but not majorly. It's still a little bit on the periphery in terms of the news. So a couple questions about that. Number one, what are the odds in your estimation of that happening? Yeah.

And then I could put out all three quickly and then we could go through each one. So the odds of that likely. And then how much Bitcoin do you anticipate they might buy, at least initially? And thirdly, to what extent, if any, do you think the current price reflects assumptions about the likelihood of that happening?

So there's a lot there. The first thing I'd mention is the U.S. government already has Bitcoin. Oh, from like when they seize it and stuff. Yeah, you're right. So they already have it. Okay, good point. And it's in the billions. Correct, yes. So they could even possibly maybe take that and do something with it. And I have no inside information. I don't talk to anybody in Washington. I go by my instincts. And when I first started watching Bitcoin over a decade ago,

My instinct was that there's something there. And what I sensed was, is the world is going digital. So for me, Bitcoin has always been symbolic that the world is going digital. Now, I'm a little bit of a Trekkie fan, not in hardcore. So if I get something a little wrong, don't beat me up. But you go back to the original Star Trek when Kirk had a flip phone.

Well, we used to have flip phones. Go to Star Trek The Next Generation, everything looks like iPads. There was things that you would put in your ear and you could communicate and talk. We've got earbuds now and we're talking. So if you really pay attention, they talk about credits, right? There's something that's called latinum, rare mineral, and they have to put it in gold. That's different. But in a few episodes, you hear about credits.

The blockchain is a ledger of debits and credits. To me, you can have an intergalactic digital currency. And to me, at the moment, that's Bitcoin.

Well, some people do refer to it as the currency of the internet. It's the closest thing to a pure money of the internet. Correct. And then we just had Chair Powell of the Fed say that it was just like gold. It was fascinating to have the Federal Reserve even commenting on Bitcoin, and that took us over 100,000.

I think we're moving digitally. I do believe there's a very high likelihood that a government, we've already seen other governments. Yes. I think there's a good probability that we do create some type of program. Let's call it a program. I don't know what the program is, whether it's a reserve or not, where we house a digital government.

- And tell me about the role of ETFs for let's say, we could just say Bitcoin, but it was Ethereum, et cetera, that obviously helped the sector, it obviously brought in a lot of money and made everything. So to what extent might that also play a role in? - Oh, because the individual investor now has access. If you wanted to buy a token or a cryptocurrency of any kind, whether it be Bitcoin or something else,

It was cumbersome before you even had Coinbase. So you did have Coinbase, that made it a lot easier, but even prior to Coinbase, you had to go up on electronic exchange. Mm-hmm.

And if you lost your password, you lost everything, right? Most individual investors hear that and they run. Now that you have access through an exchange traded fund or ETF, it's democratized the ability to have access. This is quite, in my opinion, quite significant to the growth in the marketplace.

Bitcoin is again, 103,000 as we speak. Do you have any targets on that? I do have targets. Now, I'm not doing long-term targets. The way I say try to do your long-term target, the way the algorithm, the program of Bitcoin works, you can only create 21 million Bitcoin. So it's scarce. It's designed to be scarce, similar to gold.

We have 8 billion people in the world. Just think about 8 billion people. Forget about even a country having a reserve in it. If every person in the world wanted to own a piece of Bitcoin, it's staggering, goes into the millions. So longer term,

If we really create reserves and make it a true form of a digital asset, it's going significantly higher even from where we are today. But short term, once we get over the hurdle of 100, which we are now, when we reach important psychological levels and 100,000 was, you kind of bob and weave. Now we've busted through that. So the next target is 113,000.

and the target above that is 150. So those are my near-term targets. - And let me ask you, how do you arrive at those numbers? 'Cause you mentioned there's an element of technical analysis and other things. - There's no way to fundamentally value. You can estimate who's going to buy, right? That's how you get up into the millions.

So I'm purely doing this technically. The technicals work phenomenally well within the crypto space. So these are all technical measurements. Right, because you're stripping out there. No dividends, there's no cash flow, so that limits your analysis. Right. So let's assume the Bitcoin reserve does not happen. Let's assume with that for a moment. What's your bullishness on Bitcoin compared to Ethereum? And then I'll just say all the other altcoins. I won't use the S word on the podcast for that.

those coins. But like, are you bullish on... I'm just curious, what's your take on that? So Bitcoin is a unique entity. I really believe it's a store of value. Everything else, Ethereum to everything else, is technology.

It's a form of technology. And even though we call it a currency, we call it a token. And this is similar now to the internet, right? We don't know who all the winners are going to be or the losers. But Ethereum has a very large platform on the blockchain with a lot of programmers developing smart contracts on the blockchain. But they have competition.

You know, Solana would be- Has done amazing. Exactly. But, you know, this space, I have to really do a disclaimer. This space is not for the faint of heart. These assets, when they go up, they go up exponentially. But when they go down, they go down hard. The volatility is the most volatility I have seen in any asset class in my entire career.

And Wall Street's trying to figure out how do you put this in a client portfolio? And the estimates that I'm seeing is anywhere between 1% to 5%. I would say the basic range is between 1% and 3%. But you have to rebalance more often.

especially when you're in a bull cycle because they're growing exponentially. Right. Now, if you do have that rebalancing, might that not reduce some of the volatility and smooth out the peaks and valleys? I mean, just thinking about pre-Bitcoin ETFs,

Or will it not? I'm just curious. It will help a little bit. And the industry is trying to create products that reduce volatility. I don't know if I can name any companies, but there is a company out there right now that just released a product where they've been able to have crypto in it and reduce volatility by putting treasuries in. And it's a momentum-based product.

And to me, that's fascinating. I think the industry is trying to find ways to reduce the volatility so clients are more

are more willing or more acceptable of having it as part of their portfolio. Exactly. I could totally see innovation and ETF space around that depending on what you're trying to get out of the investment. One last question on Ethereum. I just want to go back to that. So you clearly put Bitcoin up here. Are you net-net neutral on Ethereum? Negative? Slightly positive? How would you characterize your opinion of that? Well, because we're in a bullish cycle for crypto...

I do believe we'll eventually see an all-time high in Ethereum. I see, okay. So I wouldn't call that bearish, would I? No, I wouldn't.

Thank you for clarifying. So going back to what I like within the market for investment for 2025, in terms of banks and capital markets, I'm very bullish. The Trump administration is expected to have more of a deregulation type of environment, M&A activity.

should pick up particularly in the banks. So I think banks will do well, but I'm more positive on capital markets and I'm even more positive because I don't hear people talking about the capital markets, they're talking about banks. And if we're in a bull market for the stock market, capital markets are going to do well or the majority will do well. So I really like that space. And where I'm negative is healthcare actually looks sick to me.

in terms of relative performance looks very weak. Consumer staples look very weak, but the cyclicals look good. And that's a sign that the economy is gonna grow in 2025. A very bullish infrastructure, right? I still think we have this huge CapEx, not just in AI, but the infrastructure in this country still needs updating. So I like parts of the industrial space.

Right now, I always bullish utilities and I'm longer term, very bullish utilities, but you have to be careful with interest rates. They are a leverage play into AI because for the first time in 20 years, electricity demand is growing. It's growing for AI. It's growing because of mining, blockchain.

So I think there's very interesting investment opportunities within also the utility space. Right. You can get more than dividends historically. There's a growth component to it. Correct. But you have to be sensitive to the interest rate environment. So I also want to ask you about the role of lower potential corporate tax rates as well, too. That's just add the cherry. That's the cherry on top. Yeah. Right? Because that's going to add to earnings. At the end of the day, what drives stock prices is earnings. Right.

And earnings have been stronger than what most people have even anticipated. And I think we're still trying to figure out AI and how it's going to impact earnings. Another positive is corporate profit margins, I think are gonna continue to grow.

The other amazing thing and why I'm so bullish technology is return on equity. You know, Warren Buffett always talks about return on equity, but Wall Street tends to talk more PE, price earnings ratio. But return on equity is a very important component. And when we looked at technology versus the S&P, S&P had an ROE of about 18% and tech and tech related are growing 30%.

So you also want to have that as a measurement. But again, we're not a cheap market. The market is not cheap, but I think the growth rate in technology and the growth in the economy and eventually as the Fed lowers rates, we're going to see multiple growths.

Yeah. And I think the economy of today compared to decades past is so different, right? It's so much as if information-based, more service-oriented, it's asset light, if you will. In the old days, we're just like, you know, factories, equipment. It's not as interest rate sensitive. And that's an excellent point that you bring up that I firmly believe. It's a different economy. It's

Think about it this way. Go back to the 1500s, we were agricultural. The technology was the sundial. We created the steam engine in the 1700s. We became industrial for 300 years. I believe now we're in the digital age. We're not interest rate sensitive. We're consumer sensitive. And that's another topic we haven't talked about is there is a bifurcation in the consumer. Not all consumers are doing well, but in general, the consumer is strong and

Their net worth is at a record all-time high. And their spending, we just got statistics on the holiday season. And they're above where we were last year. So as long as the consumer...

can stay spending, we're also in very good shape. Yes, and under, I mean, back of the envelope, two-thirds of the economy or whatever the number is, but it's the majority. What you just said is really interesting, that we're not rate-sensitive. And I think that's a fascinating and important point because historically, the market has been viewed through the lens of market performance and rates as kind of a seesaw. Rates go up, equities go down, and vice versa. However, as we've seen in recent years,

Not only have you had rising rates, you've had an astonishing surge in rates in a really quick time, and the market has just powered through it. And then that's really defied so many – I mean, think about even the economy. I mean, how many times have people been calling for the recession? And here we are. Things are looking okay, at least for now. So it's very interesting. Not as interest rate sensitive and a topic we didn't talk about and another reason why I'm so bullish –

throughout the decade, the amount of liquidity that has been provided from the Fed and from the government, both monetary and fiscal stimulus,

And that money eventually is going to go into risk assets, particularly equities. It normally historically has. Right, right. So what's the M2 money supplies, like 21 trillion or thereabouts or something? Right. And if you just look at money market funds, there's $7 trillion sitting there. And that's both

private and meaning individual and institutional money. With that money in money markets, how much do you think could come into play? Because the tricky thing is some of that is almost permanently going to stay in the sidelines, like I'm saving to buy a house or what have you.

Maybe it's hard to parse, but directionally at least you can say this is an incredibly high number and it also does not reflect in and of itself a lot of greed. It shows, if anything, wanting the burden to hand, if you will. And it's interesting because at the beginning of last year,

you're getting about 5% guaranteed on money markets, and yet we're up 25%, 27%. It does in and of itself suggest that there is money that can come in off the sidelines. How much is unclear, but directionally speaking. Yeah, when people ask me that question, I say I would look for at least half of that to come into the market. I think that's reasonable. We have to look at other things that are happening, but I would expect at least half of that to get deployed. Right, and then the other question is the degree...

that rates come down. I mean, if they really plunge, it might be more than that comes out, et cetera. But yeah, that sounds good. Anything else to wrap up that we haven't talked about that you want to mention? For individual investors, for my entire career, there's always been some concern and what is perceived to be a reason not to invest in markets. And history has shown that

that staying out of markets is not what you want to do if you want to grow your wealth. You have to stay invested. And particularly to the young listeners, if they want to build a retirement and have retirement funds when they retire, you need to invest now and you need to stay invested. Dollar cost average over your lifetime. My two cents, I wholly concur. And I understand if for someone who might be new to investing that

A, it's kind of scary to begin investing, and B, it might be particularly scary to begin investing when markets are near all-time highs because you're going to tell yourself, well, I'm going to wait for that 10%, 20% pullback. Well, first of all, that 10%, 20% pullback might not occur. Secondly, there's a very good chance that if that 10% to 20% pullback occurs, that instead of you actually buying, you're going to be more scared and you'll have all the more reason in your mind to

to not invest. So you're right about that. I think the quick and short of it is to invest as soon as you can. And the important thing to remember, it's not timing the market, it's time in the market. Correct. Correct.

Correct. All right. Well, I think that's a great place to wrap it up. So thank you again so much. It was a total pleasure. Thank you so much for having me. This is just a pleasure and an honor to be here. Excellent. Let's try to do it again next year. I'd love it. Okay. My guest has been Marianne Bartels. For more podcasts and the latest wealth management news, visit barons.com slash advisor. For The Way Forward, I'm Greg Bartalis.