The Fate of the Rally 12/27/24
Halftime Report
Deep Dive
Why are stocks under pressure in the last trading days of the year?
Stocks are under pressure due to profit-taking, low trading volume, and anticipation of significant rebalancing in January. Many top-performing stocks like Palantir and Vistra are pulling back, and sectors like energy are seeing reversals despite being among the worst performers earlier.
What is the significance of rebalancing in January for the market?
Rebalancing in January involves trillions of dollars being adjusted across portfolios, particularly in target date funds and ETF model portfolios. After a year where the S&P 500 rose over 30%, many portfolios are overweight in equities, necessitating significant adjustments to return to target allocations.
Why is there a focus on the MAG7 stocks in 2024?
The MAG7 stocks, including NVIDIA, Tesla, and Meta, have seen extraordinary performance in 2024, with NVIDIA up 176% and Tesla up 76%. These stocks have driven the market, and despite expectations of a slowdown, they remain dominant due to their earnings growth and market influence.
What is the bull case for Starbucks heading into 2025?
Starbucks is expected to report earnings on January 28th, with low analyst expectations. The stock is trading at its 10-year median valuation, and the hiring of Brian Nicol, a highly regarded QSR industry CEO, is seen as a catalyst for a turnaround. The stock’s historical resilience during downturns adds to the bullish case.
Why is DoorDash considered a risky but potentially rewarding investment?
DoorDash holds 67% market share in food delivery and was profitable for the first time last quarter. Despite a high forward P/E ratio, the company is expected to grow revenues by 23-30% annually, driven by strong margins and cash flow. Its dominance in the delivery space makes it a high-risk, high-reward play.
What are the key risks for the market in Q1 2025?
Key risks include potential tariff implementations, NVIDIA’s earnings report in February, and a strengthening dollar. A strong dollar could negatively impact S&P 500 forward guidance, as companies may cite currency headwinds to lower expectations.
Why is Netflix expected to continue its strong performance in 2025?
Netflix is growing revenue faster than any other year, with strong subscriber growth and a record-breaking streaming day on Christmas. Its investments in live sports, partnerships with the NFL and WWE, and a growing ad business are expected to drive further growth, despite a high valuation of 40 times earnings.
What is the outlook for dividend stocks in 2025?
Dividend stocks are expected to perform well in 2025, with companies like Conagra, Honda Motor, and UPS offering high yields and potential for capital appreciation. Historically, dividends have contributed 39% of the S&P 500’s total return, making them a reliable component of long-term wealth creation.
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