Four More Weeks: What December Will Mean for Stocks
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On this podcast, we take you inside those conversations, the stories, the ideas, and the stocks to watch so you can invest smarter. Now, let's dial in.

Hello, everyone, and welcome to Barron's Live, our weekly webcast and podcast. I'm Ben Levison, deputy editor of Barron's. Thanks for joining today's call. We'll focus on this week's big jobs report and what it could mean for the Fed, Elon Musk's close ties to Donald Trump, and what it means for Tesla. My guests are Barron's associate editor, Al Root, and senior writer, Nick Jasinski. We're also going to look at what to expect from as earnings season comes to an end. There are some stragglers, and of course, what it all means for the stock market.

And now I bring you Nick and Al. Welcome to Barron's Live. Hi, happy December.

Thanks, Ben. All right, guys. So I want to jump right in. This week doesn't have a ton, but it has jobs data, tons of jobs data. So, Nick, I want you to tell us about what's expected, both because, hey, we want everybody to have a job that needs one, but also because the Fed has a dual mandate to price stability and maximum employment. And jobs is going to tell us about the latter. So what's expected?

Yeah, so Jobs Friday, that's the big one. That'll be the November employment report. The consensus estimates are for 200,000 jobs added in November, which would be a rebound from just 12,000 added in October. Both of these are going to be pretty messy reports. October, as you recall, there were two big hurricanes that hit the U.S. Southeast. There was also the Boeing strike.

which took 30,000 workers alone out of the workforce. Plus there was plenty of downstream impact on Boeing suppliers. So November is going to be some of the rebound from that. Both of these are, the word for these is messy reports. It's trying to pull out what is that one-time impact from the storms, from the rebound, from the Boeing, from the rebound to what is actually the trend. If it is something like 200,000, then that kind of gets you average that with October and you're just above 100,000 jobs

added for those two months, which would sort of match the pace since the end of the summer. As for the unemployment rate, that's expected to tick up to 4.2% from 4.1%. Not a big move there. That was at 4.3% as recently as August. It's been kind of bouncing around this level for the past six months. That's what we're looking for. And so when you look at this number, as you said, it's week October. We are hopefully going to get a strong November, but we have to sort of say, hey, wait a minute, that's just a rebound.

What is the overall trend in the job market then? The overall trend is cooling, but from these really overheated levels we saw last year and in 2022, where you recall every single restaurant had a sign outside saying now hiring, the delivery companies were struggling to hire enough seasonal workers, the

The unemployment rate was down to the lowest it's been in 50 years. So it's not that tight anymore, but it's also, this is by no means a weak jobs market. Unemployment rate of 4.1, 4.2% is very low by historical standards. Basically people who have a job want one.

In some ways it's a labor market that's just kind of frozen where it is at a pretty solid place. There really are not many layoffs, but companies aren't really hiring that much either. So things are just kind of, there's this measure of job churn or job market churn that put up by the Atlanta Federal Reserve. And that's like as low as it's been in decades. So things are just kind of frozen where they are and a pretty good place. - But you're also saying that this is probably not the time for me to quit my job and go look for work elsewhere.

No. Stay in your job. Barron's needs you. All right. It's good to hear that. All right. So, Nick, what does this then mean for the Fed? Because really, I mean, as much as I care about the overall economy and everything, I want to know what this can mean for the Fed, because really it's all going to drive a line straight through to the stock market.

Pretty much. So like I mentioned, it's going to be another messy report, barring some big deviation from that expectation. There are some estimates out there for jobs growth of 250,000 or more.

or if there's a big miss again that shows that October was not just a blip because of these one-off hurricane and Boeing and all that. Barring some big deviations, it'll be a combination of this report and then next Wednesday, a week from day after tomorrow, we'll get the CPI data for November also. And I think that'll actually be even more important to determine whether

the December meeting, which is on December 17th and 18th, whether that'll be a cut or a pause. Right now, I'm just looking at the futures market implied odds. It's about 60/40 in favor of a cut. If they do pause in December, then I think a cut will shift to January meeting.

Just listening to what some of the Fed officials and Chairman Jerome Powell have been saying recently, there's no rush to cut. The fact that the economy continues to be solid, that the labor market is sort of in this place where they're happy with it where it is now, and inflation readings been firmer lately, kind of more in the two and a half to 3% range. All of that is showing that there's no rush to cut. Powell is speaking this Wednesday, so we'll hear his latest thoughts then.

And then there's all the just kind of thinking about 2025, which I know we'll talk about later in this call.

They're never going to say it, that it's due to politics or the new administration, but the outlook, and we're going to talk about this again later, but the outlook is probably for higher growth, higher inflation, which again argues for a slower pace of rate cuts. But for now, interest rates are at a level where if ed officials are confident that it's restrictive, they'd like to take off some of that restrictiveness, but it's signaling a shallower path of

of rate cuts next year. They will give their summary of economic projections, which they update every quarter after the December 18th meeting. And that'll be a chance to see where officials are thinking about for next year in terms of growth, inflation, and what rates might go. In September, the last time they gave a dot plot, the median estimate was for about a percentage point total cuts in 2025.

I think that number may come down, which may actually be more significant for the market reaction than whether they cut in December or January by another quarter point.

Yeah, though, I mean, I can't help remembering, but at the beginning of the year, there were expectations, not necessarily from the Fed, but from the market that we'd get numerous rate cuts this year. I can't remember exactly how many, but it was like seven or something. Yeah, seven quarter point cuts, so just under two percentage points. And that obviously did not pan out. And the market had an awesome year anyway.

And so, yeah, let's let's think about this. I mean, we're coming in. We just had an awesome November. I think we're at five point seven nine, something like that percent is fantastic month. We do have this jobs report. We have the Fed report.

What is, you know, and we're getting questions now, you know, from our readers. Mark was asking, you know, should we be concerned about this market strength as we head into year end? So let me start first with you, Nick. How do you think this December is going to be? And, you know, how worried are you about just the kind of gains that we're having?

I mean, the short-term market calls we've talked about on this call before are sort of a, that's almost a coin flip. It's hard to make a really good short-term market call. But just looking at, I like to look at the sentiment indicators and pretty much all of those are as bullish as they get. Those are contrarian indicators. So one that I like to look at is this, the Citi Panic Euphoria Index, which right now is sitting at,

That's the highest it's been in years. The threshold for what they consider euphoria is 41. So we're way above that. It was last week or the week before there was also the institutional investor survey had the bulls at 61.3% and the bears at only 17.7%. They like to look at the spread between those two, and that's also the biggest spread in a while.

Again, those are contrary indicators. At some point you run out of additional bullish people to be getting into the market and buying, and you just get these pullbacks, which then leads to the percentage of bears going up and bulls going down. And then the contrarian indicator works in the other direction. So just purely based on sentiment, it feels like we're heading for a bit of a, this can't go on forever.

Do you think this comes in December or do you think this is something that it just we should be worrying about the longer we should worry about more the longer it goes on?

You know, it's like a coiled spring. The longer it goes on, the more potential there is for some sort of catalyst to knock the market. That could either be the jobs report or inflation next week if that leads to a big repricing of odds of Fed cuts. It could be some crazy political news. It could be something from overseas and geopolitics. I don't know what the catalyst will be, but just given it's like a coiled spring where the market is now, it's just more sensitive to some sort of negative catalyst that leads to a bigger reaction.

And Al, what about you? What do you think the market does between here and the end of the year? Here in the end of the year, that's a good question. As usual, I agree with Nick, right? These short-term calls are a coin flip.

I think that probably December, you get the Santa rally, you get people's expectations, what drives a Santa rally, people's expectations that we're optimists. All of us are collectively optimists. We think 25 will be better than 24. So some of that will get reflected. I do think that the December 18th meeting is a big deal because part of the narrative is falling rates are a tailwind for stocks in 25. So anything that knocks that

uh narrative uh down a peg would be negative but again maybe they'll cut 25 maybe we'll still have 100 basis points or one percentage point of cuts implied for for the coming year and and everything will be fine um and and like we don't have the jobs report yet so again it's a little better than a coin flip you know i think you know i think bottom line is it's so there's so many variables um i think that the most pure you know warren buffett-esque

observation is what we got in 2024 was accelerating earnings growth. We're going to grow earnings for the S&P 500 about 8% in 2024. We grew 2% in 2023. The expectation right now is for closer to 15% earnings growth in 2025. So as long as we have expectations for accelerating earnings growth, that's a powerful tailwind for stocks.

Now, how that all comes out in the wash in terms of valuation and what the reality of earnings growth turns out to be and then what we decide to pay for that earnings growth is secondary. But as long as earnings are growing, I don't expect disaster for the S&P. All right. I actually want to disagree with both of you because I think the short term is the easiest to predict.

It's the long term that always, well, it's the very long term. I can get that to the market goes up, but it's once you get past, you know, someplace in between, let's say three weeks and a year or two years, three years, then I have issues. I just, I think we're going to have a nice rally into year end. And the market is enjoying investor to enjoying themselves or thing, seeing things go up. They're optimistic. Why should it change? Let's, let's rally into year end here. Yeah.

All right, but then we get 2025. In 2025, we've just had, unless something really major happens, we've had two years of gains more than 20% in '23 and '24. Heading into this '25, what the heck can the market do for an encore to the encore? Al, tell me. Well, I'd point all of our listeners to our esteemed colleague Ian Salisbury. He took a look at this with some help from Bank of America.

You know, the S&P has gone up more than 20% two consecutive years, four times in the last 100 years. The results for the third year are mixed. If you sort of average it all out, you would expect perhaps a gain, but a smaller gain. And again, that's an observation based on history. There's different setups, different presidents, different interest rate environments. But, you know, smaller gain, smaller gain.

Again, I would default back to that earnings growth. If we get accelerating earnings growth, I'd expect the market to go up, maybe not 26%, where it sits right now, maybe it's 27, something like that.

So, you know, we'll get, I would predict for 2025, Al's official prediction is we get a gain that's below earnings growth. So the market has a smaller PE going in 2026 than it does right now. How's that for specifics? I like that actually because the market is not cheap right now and the market is 22.3 or something like that. The highest it's been in a while was I think it touched 23 in 2021. We remember what 2022 brought last year.

or if we don't, to bear market. So having a lower multiple would be good. Yeah, so it's about 22 times. And then the secondary prediction is President Trump, tariffs, lower taxes, that favors domestic industries, favors sort of small caps. And the S&P 600 is only at about 17 and a half times earnings. So that's done well since the election, but maybe you want to look at small caps. That's my 2025 prediction. And Nick, what about you?

- So coming from my economic side, the market is not the economy and the economy is not the market, but it's looking like a pretty solid economy for 2025. Growth in the US should be above 2%. Inflation may remain closer to 3% than 2%, but we still get this tail end of investment spending, productivity growth that may warrant fewer rate cuts by the Fed, but again, kind of for the right reasons. I think that's why going back to this year, the market was pricing in so many cuts,

This year, they didn't end up happening, but that's because the economy and the labor market held in there better than people were thinking they would at the beginning of the year. So it was a good reason to not cut as much. I think 2025 may have some of that element to play as well. Al, you mentioned the tariffs and the tax cuts.

I'm gonna cite B of A again. They estimate that proposal of a 60% tariff on goods from China, 10% tariff on the rest of the world, but subtract something like 3% from S&P 500 earnings per share next year. At the same time, they estimate that earnings per share would rise by 4% if the corporate tax rate gets cut to 15%. So basically those offset each other. I guess that means that the timing matters, which one comes first or all that, but it's,

I'm not too worried about the fiscal side knocking the market in 2025 at least.

All right, that's good to hear. So Masako wants to know when we expect a severe correction of the stock market. And Peter was asking where we think the stock market goes during the first 12 months after President Donald Trump takes office as president. And so this feels like a pretty good time for us to talk about what could knock the market down next year. What are the big risks that we should be thinking about?

Al, let's start with you. Okay, so Severe Corrections starts the third Tuesday in January. That's good to hear.

That's a joke because again, the short term it's just very difficult, right? And you never know exactly what it's going to be. Could be one of Nick's reports could be Nvidia earnings one of these days who. It was actually, I think that might have been when the bear market started in 2022, we had that rally right out of the gate. And it, I think peaked right around that third Tuesday, I'll have to go back and look. And then it was off to the bear market races.

Yeah, I mean, I joke, but it's difficult to know. Like the things that I pay attention to, right, I am certainly paying attention to the level of geopolitical conflict, right? We seem to have a different policy out of Russia regarding nuclear weapons. I'm not joking about that, that the market seems to have not cared at all. I do think that's significant.

We have a changing administration and with promises to take the global geopolitical temperature down. So that's something to watch. So besides, I would just watch interest rates and geopolitical tensions. That would be the top of my list for 25 of the things early on that I'll be watching.

And then all of these, you know, Trump's appointments, Doge, you know, how Trump feels about the budget and getting that under control. I mean, all of these things can have an impact. And so I would just say that we don't know exactly how all that will turn out. So, you know, those are potential volatility inducing events in early 25. Right. And Nick, what about you?

I think if there's nuclear war, we've got bigger things to worry about than what the S&P 500 is doing. But that certainly seems to me like the kind of catalyst that not necessarily nuclear war, but something from that geopolitics where it's something unexpected with potentially global and really far reaching implications. Does uranium make a good hedge for nuclear war? Again, I think we got bigger things to worry about than what the stock market is doing in that scenario. But yeah,

I just the economy is going to continue to be solid. Earnings are going to grow. You may have some some downside to valuations, but I don't see any other real catalyst for a severe correction like Masako was asking about, other than some sort of unexpected and really negative and scary geopolitical outcome, whether it's from the Middle East or China and Taiwan or in Europe. I think those are the sort of things that are pretty unpredictable and are not priced into into markets right now.

I did not mean to depress us all. Well, I'm going to throw one at you, Nick. Alexander was wondering, do we have to worry about a Fed increase of interest rates?

I doubt it. I doubt it. I think that, again, it's 12 months. A lot can happen. But the inflation picture is just so different than-- when the Fed-- the interest rates peaked a year and a half ago, inflation was running at 7% year over year. Now it's 3%. Interest rates are just calibrated for a different economy than they are now.

even if that destination of rate cuts next year is higher than people are expecting, there's still room for rates to go down. It's going to take something really severe for interest rates to increase next year.

Right. I'm going to throw one more thing into the mix. I'm watching the dollar. It is strong and has stayed strong despite so many people saying that it will be weak. And if it does make some new highs, it hasn't yet. It's still sort of trading at peak levels within a very large range. But if it can break through and hit new highs, it's going to be strong.

I think you could see a currency crisis somewhere, which would be maybe a lot of fun from an intellectual perspective, but not from a market one.

Yeah, you know, another thing I thought is the, we recall that Liz Truss month in the UK, where she was the prime minister, unveiled that budget that called for a lot, lot more deficit spending. And you had this huge jump in gilt yields of the UK sovereign debt. At the same time, the value of the pound went down versus other currencies. Usually those would go in the other direction from each other.

I could see a moment where the bond market wakes up and starts to push back against really deficit increasing policies from the new administration. And that could lead to bond yields jumping. You may even see a failed treasury auction. And I think that would be met with a pretty big panic in the stock market and the bond market and all kinds of different markets if there's questions about the US treasury market in that kind of way.

I could have said the same thing 10 years ago and it hasn't happened yet. My policy towards the national debt is I'm going to worry about it when the bond market worries about it. And so far it isn't really. But I think that's another thing that could cause a pretty big correction in the stock market. And we haven't really seen the full fiscal plans of the new administration yet. So we'll see how the market reacts to those once there's actual specifics on the table.

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All right. Sounds good. Well, let's move on. Let's move on to, oh, let's say Elon Musk. I'm used to talking about him within the context of his companies, Tesla, SpaceX, et cetera. But instead, we're having to talk about him as a real player in politics. He's Trump's first buddy in quotes. I think that's right, Al?

Can you tell us, bring us up to date on this relationship between the two of them? And I mean, this is just, I mean, to me, it's wild. He's added something else to his long list of to-do list things.

Yeah, it's difficult to summarize. So we just go with exactly the question. But let's bring everybody up to date. So you have the richest man in the world worth about $340 billion backing President-elect Donald Trump's campaign. Donald Trump, of course, won. So Tesla has added about $300 billion in market value and counting since the election. The relationship seems to be flourishing. They're eating McDonald's, going to UFC fights. President-elect Trump is

is attending SpaceX launches in Texas.

It's difficult to come up with a historical precedent, right? You had maybe Andrew Mellon in the early 20th century and his involvement in government. He served several presidents. He was a banker. But, you know, Musk in all of his tentacles from owning a media platform, X, to owning the world's most valuable aerospace company, SpaceX, which does a lot of business with the government, to Musk controlling the world's most valuable car company,

which is more aligned with green policies, which is antithetical to some of President Trump's comments. So you have a lot going on.

And now, oh, by the way, yes, there's the creation of DOGE, Department of Government Efficiency, which Musk and Vivek Ramaswamy will run till July 4th, 2026 is when it's supposed to wind down. And it's sort of like a quasi consultant telling Donald Trump where he can make cuts in the federal government to make it more efficient. Could impact the Defense Department, could impact the tax code. Who knows?

So, Musk and government is a source of volatility, volatility for Musk's companies and volatility for federal employees and things like that. That is sort of the getting people up to speed.

You know, there's a lot written on conflicts of interest. There's a lot written on, you know, will this relationship break down? I think nobody has any real idea. We're all just guessing. That's it. All right. So I'm that annoying guy in the newsroom who always asks questions.

What does it mean for the stock? But I'm not the only one this time. Lee has written in. He says that he can't let you go out without asking you about Tesla stock. Is it a buy in the mid 300s? It looks like Elon is going to be busy, perhaps stretched too thin. What do you think? OK, so we've written we've reached the contractual obligation that I have to talk about Tesla. So the question is, is it a buy in the mid 300s? My standard statement about Tesla.

Always holds. I never short Tesla. I look at Tesla from a market weight perspective. When it's really frothy, I would say I would own the lower end of what I'm comfortable with Tesla. If I was 2% to 6%, I would own a 2% position in Tesla right now.

At Tesla in the 200 to 250, I feel like it's fairly valued. I would own a 4% position in Tesla. And then like in January of 2023, when we made it a recommendation for Barron's, it was $106. We felt like that was overdone. Given, frankly, some of the concerns about Musk's distraction when he took over X,

I would own a 6% position in Tesla. So do I feel like Tesla is overpriced right now? I feel like it's frothy and I would be at the low end of my holding. That is my official answer. So it is a backhanded way of saying it's expensive. You know, we wrote recently that Tesla could be fairly valued at about 200 bucks a share for the power storage business in the car business. And then everything else, you sort of have to figure, okay, how much is based on Musk? How much is based on the future? All this sort of stuff.

So right now you have about 160 bucks in the stock for future robots, self-driving cars. It could turn out tremendously well. There are multiple estimates on Wall Street that says self-driving cars are a trillion dollar opportunity for Tesla. That's great. I don't dispute that. I only would point out that they have yet to complete a fully autonomous drive. Which is kind of amazing because others have, right? Yeah.

Yeah, Waymo does 150,000 self-driving cab rides a week and counting, and they're expanding across the country. So self-driving cars are coming. That's also not necessarily a bad thing for Tesla. It shows that it can be done. But the Tesla technology, they're basically improving the driver assistance software to the point where the car drives better than the human. It's still not there. So it's an interesting rally, right? We've added $300 billion.

in Tesla value post-election and earnings estimates haven't changed for '25 or '26. So the stocks just got more expensive because people believe that self-driving cars are coming and people believe that the Trump presidency will benefit Tesla somehow. That's fine, I just point it out as, huh, that is curious to me that it was

you know, this much of a rally. People, you know, I think that the average Wall Street analyst said, oh, you know, Trump presidency is good for Tesla, lower taxes, proximity to the president, you know, maybe a federal standard on self-driving cars, you know, all of this sort of stuff.

You know, they put, you know, I would say the average was about 40 bucks a share. So, oh, post-election, you know, Tesla stock might start pushing 300. Well, lo and behold, Tesla stock does what it does. And now we're pushing 360. So the market always does more than you think with Tesla stock. And then I just go back to my valuation comments. So I am at the low end of my comfort range in Tesla now. That's what I would do if I had real money in the stock, which I don't because I write here.

All right. Fair enough. Well, let's jump ahead to some earnings. I mean, it's earnings season and still there are some stragglers. Nothing as exciting as an Apple and Nvidia or anything like that. Al, I'm going to read off some of your numbers and we're going to just jump straight into some of the companies. So 485 of 500 companies reported 76 beat.

That's solid. They beat by 7%. So it's fine. And as you said, the market earnings are supposed to go up 10% this year, 15% in 2025.

So pretty decent all around. And now we're going to get, I think maybe the biggest name this week is Salesforce. Al, what's that stock been doing? It's, you know, it's kept up with the market this year. What are investors looking for? Yep. So earning season has been good. Salesforce is Tuesday, I believe. Stock up about 26% year to date. This is a

Trades for 30 times 2025 adjusted earnings. Andrew Barry will chastise me if I don't point out adjusted earnings and gap earnings. There's a big difference for Salesforce because of their stock-based compensation. So just be aware of that, everyone.

But they're a growth company, right? They need to beat and raise, they give guidance. So, you know, the guidance for 2024 is, you know, 10 bucks to 1010 essentially. So we look for a beat and a raise. And this is all about AI, right? Large language model.

LLMs, making people's workflows more efficient. If you read transcripts, you hear LLM and AI. They just hosted the largest, what they called the largest AI event in the world in September. They called it Dreamforce. So that's what you have to deal with when you're listening to Salesforce earnings and you just want to beat and raise. And do you think, is that possible? Or is this just another one of these companies trying to jump on the AI bandwagon and make something where there's nothing?

No, I think that they have a legitimate chance to beat and raise it. And I'm only basing that on what's gone on in recent quarters. Fairly solid prints and stock has been up. So, you know, again, given the backdrop of the economy and still relatively tight labor market, I don't see a reason why Salesforce should...

should put up anything that's wildly disappointing. Sounds good. And yeah, the stock is pretty close to a 52-week high right now. So that'll be interesting to see. Let's move on to Campbell, Campbell Soup, except not soup. They chopped that off of its name. So Nick, tell me, is it going to make a difference if they're Campbell and not Campbell Soup? Yeah.

Yeah, I mean, it's still the same company. This is reflective of a new strategy. They had this investor day in September and they unveiled this focus that's more on the snacks and cookies side of the business rather than the meals and soups and sauces. Some of their snacks and cookies brands are like Pepperidge Farm and the Snyder pretzels, Goldfish, Cape Cod chips. And I would like to say that in my family, we eat quite a few of those, including the Goldfish are just addictive.

Gold snack that smiles back. For the whole industry, packaged goods, it's been a faster growth area than meals. Just in September at that investor day, they said that they expect that business to grow 3% to 4%.

per year, which is not bad for consumer stable stock. And then the rest of the business, which is frozen meals like Swanson, Prego sauces, other stuff like that. Campbell's soup, of course, they still do make the soup even if it's not in the name of the company. The target for that business is 1% to 2% annual growth. So that explains the focus on the snack side. It's growing faster. This coming quarter, which is the three months ending in October,

Ironically, the meal related categories are actually expected to do a lot better than snacks. And that's part of a macro just this year where consumers seem to be pushing back on some of the eating out, which is getting more and more expensive and actually shifting to more at home eating. That's like a reversal from the post pandemic period where everybody was eating out and doing less of the eating at home. Now there seems to be going back.

Just since that investor day in September, the stock is down 20%. So investors didn't really buy this new strategy. I think management still has some convincing to do that, that focusing on snacks over the longterm is the right plan. And the numbers this quarter probably won't really help make that argument. The overall earnings per share expects to be down 4% from, from last year. That's not what you want to see declining earnings.

All right. That sounds good. Well, let's move on to another company. This one is ChargePoint. Unlike Tesla, which has had, you know, done pretty decently recently, anything else related to these has kind of stunk this year. Al, what do we expect from ChargePoint? Yeah, I'd like that. I like soup. I don't know if that's going to help Campbell, but I like it.

So the EV market was challenged in 2024, right? Tesla's growth actually basically flat year over year for 24. People expected to accelerate with new model introductions in 2025, but it was a very difficult market. And that got reflected in EV charging stocks.

Actually, ChargePoint is sort of it's almost a soap opera-esque level story. They changed management in late 2023. They had very weak quarters with no growth. It's supposed to be a growth stock. It's a startup. It's not profitable yet.

So the stock's down 50% year to date. It's also down 36% over the past three months. So it was not an election beneficiary. You see sort of not the disconnect, but Trump is likely to slow the adoption of electric vehicles. That gets reflected in some of the startup stocks and EV charging stocks. And then Tesla continues to go up because people believe that the Musk-Trump relationship will benefit the company.

So sales matter more than earnings. They're expected to be about 90 million for the quarter, down for about 110 million a year ago. You would like to see guidance for Q4 that shows some growth and traction for management. New management team been there about a year.

But again, it's been a difficult year. People will be looking for some sign that EV growth will continue in 25 and that they'll be able to take advantage of it. All right. That sounds good. Let's move to something completely different. With prices up and lower income shoppers struggling, you'd think that Dollar Tree and Dollar General would be doing well. They're not.

They both report earnings this week, Dollar Tree on Wednesday, Dollar General on Thursday. Nick, why are these stocks struggling so badly? Yeah, they've both been disasters this year. Dollar General is down 44% since the start of the year. Dollar Tree is down 49%. You know, the best time for these stocks, unfortunately, is during recessions when people are really hunting for bargains and they can attract shoppers who don't usually shop there and they see a boost to the revenues that way.

This year, the sweet spot has really been more value than bargains. It's places like Walmart and Costco. Look at how those stocks have done. Some of the off-price clothing retailers have done well, too. Meanwhile, for the dollar stores, they've actually started to move away from that $1 price model, given inflation. They're seeing rising costs related to labor and transportation. It's a pretty low profit margin business to begin with.

So breaking the buck as our colleague, Teresa Rivas calls it has actually led to this weird dynamic where customers are facing sticker shock at the dollar store because things aren't a dollar anymore at the dollar store. And you might actually get better value for some of the things at Walmart and Costco or they're not doing the same shrink inflation to try to keep things as low of a dollar price as possible. You may get more bang for your buck at some of those other places.

Dollar Tree also has issues because they did this acquisition of Family Dollar a few years ago, which really hasn't worked out. Now this year they said that they're reviewing strategic alternatives, which is a code for, in corporate speak, for looking at selling it. It's hard for this quarter to be any worse than last quarter for these two companies. In late August, early September when they last reported, Dollar General fell 32% the day after earnings. Is that a lot? And then Dollar Tree fell 22% the day after earnings.

Pretty bad. So the, I mean, just looking at the chart, it's like, as I was saying, don't catch a falling knife. At the same time, they are quite inexpensive. If you're a patient long-term investor, you may find this to be a decent entry point. I'm not a market technician, Ben, I'll leave that to you, but the technicals may be interesting as well.

I don't know. Tough place to be lately. Yeah, I think you want to see some improvement in those businesses more than anything. So it does look like Dollar Tree is going to have some positive earnings growth. Yeah, Dollar Tree actually supposed to be up 10% year over year. Dollar General earnings are expected to be down 26% year over year, which would be the seventh straight quarter that they have a negative number in front of their earnings year over year. Yikes. Also not great.

No, not great at all. All right. We're coming to we're running out of time and I want to just hit a few questions. I feel like we can't walk away without talking about two companies. One, Joseph asked about Apple. Is it going to do well for Santa Claus rally and into 2025? I know this is coming at you out of the blue, but Nick, Al, either of you have thoughts on Apple stock?

Nick, who wants to go first? It's definitely a hot Christmas present. There's been two pairs of AirPods bought in my family for this Christmas. But it's just so much of the rally in tech has been about the AI sentiment. And Apple seems to be a latecomer to that. So that kind of incremental AI revenue, I think they still have some convincing to do there.

Yeah, that's a tough comparison against when you're looking at NVIDIA and Microsoft and Alphabet, which are really the companies that people compare Apple to. And they're talking about their big AI revenues coming down the pipe. Apple doesn't really have that line item to share the same way that some of those do. And that's what the market is focused on right now. All right, Alan, what do you think? So Apple, and again, there are people that are Apple specialists. Now, I worry about two things. One, it's about...

32 times calendar 25 earnings. So it's expensive. It's more expensive than the market. And it really isn't growing much faster than the market or isn't really expected to grow much faster. And when you look at the capital spending, and we did this for a couple of stories, Ben, you know, we did it for Alphabet Story and then for some of the NVIDIA stories. When you look at the capital spending, who's buying NVIDIA chips and who's sort of investing in core AI technologies? It's not Apple. It's Microsoft. It's Amazon. It's Alphabet.

And Apple seems content to sort of outsource their AI expertise to open AI. And whether that is a great strategy is yet to be seen, but I would worry that Apple and its ecosystem is not aggressively spending money to develop their own AI expertise, they're relying on others.

What does that mean in the long run? Again, talk to our colleague, Tay Kim. But it makes me say to myself, huh, that's curious. All right. Well, I'm just going to point out that Apple is trading a record high today. It looks like it may be breaking out of a range. We'll have to see where it finishes up the end of the week. So I'm wondering, what is the market saying that we're not?

All right, we have two minutes. So I was going to ask about Nvidia because we mentioned it, but I'm going to actually go to Bharat's question. Hope I got your name pronounced right. What stock would you hold for the next five years? Al, I'm going to start with you. Oh, goodness. Well, a couple of things.

Not Apple. And given my earlier comments, not Tesla. And Ben, I just want to reiterate, you're so right. Sometimes we get caught up arguing with the market. So maybe they are seeing something in Apple. We're not now. So my stock is Alphabet, right? I feel like it's beaten up. I feel like it's at the trough of sentiment.

And I feel like they are investing in their own AI and no matter how the world turns out and no matter what the government does and what pieces of Apple end up or excuse me, what pieces of Alphabet end up where if the government succeeds in sort of carving out some of its assets. I think five years from now, when you add it up, you've done very well holding an AI leader. All right, Nick, do you have one?

Yeah, my stock for the next five years is SPY, the S&P 500 ETF. That's a little bit of a cop out. But I think that that is my highest confidence stock that I can tell you. When you look back at history over five year periods, there are very few where the S&P 500 has not had a positive return. I didn't realize that was an option, Nick. That's not fair. The question was not which company, the question was which stock.

That's true. All right. So I just want to thank both of you, Nick and Al, for being here. And I want to thank all of our listeners for dropping in next week on Barron's Live. Lauren Rublin will be back. It'll just be her and me talking about markets and looking ahead to the Fed, the end of the year and everything else. So please get your questions ready. We hope you'll join us. Thanks again and happy investing. Thank you. Thanks. Happy holidays, everybody.

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