What to Watch in the Markets the Week of December 16th
Barron's Live
Deep Dive
Why does Ben Levisohn believe the stock market could gain another 20% in 2025?
Ben Levisohn believes the market could gain another 20% in 2025 due to the AI trade, which is expected to pull forward productivity gains, improve margins, and make companies more profitable. Additionally, potential deregulation, comparable to the Reagan era, could further fuel the market. These factors, combined with strong earnings and expanding margins, suggest the market could continue to rise despite current high valuations.
What are the potential risks to the stock market in 2025 according to Ben Levisohn?
Potential risks include tariffs, possible deportations, and unpredictable Trump policies, which could cause volatility. Economic slowdowns, rising unemployment, and inflation are also concerns. If inflation ticks up or demand for key sectors like AI chips declines, the market could experience significant drops. Additionally, rising market volatility alongside gains could signal a bubble, similar to the dotcom era.
What is the outlook for the Federal Reserve's interest rate decisions in December?
The Federal Reserve is expected to cut interest rates by another quarter of a percentage point in December. However, there may be dissension among Fed officials about the necessity of the cut. The Fed aims to recalibrate rates, bringing them down from over 5% to a more moderate level. Future rate cuts may be fewer and spread over a longer period, with the Fed adjusting its economic forecasts and dot plot accordingly.
What is the significance of FedEx's upcoming earnings report?
FedEx's earnings report is significant due to potential discussions about spinning off its freight business, which could unlock value. While earnings are expected to grow slightly, revenue may drop marginally. Analysts are more focused on the company's strategic moves, such as cost-cutting and price increases, rather than the earnings themselves. The freight spinoff could be a key driver of investor interest.
What challenges is Nike facing, and what is the outlook for its stock?
Nike is facing challenges such as weakness in China, increased competition, and declining sales of classic products like Air Jordans. The stock is down nearly 30% this year, and earnings are expected to decline. The new CEO is focusing on recalibrating the company's strategy, including broadening sales channels and improving designs. However, a turnaround may take time, and the stock's performance remains uncertain.
What is the investment outlook for Palantir, and why has its stock performed so well?
Palantir's stock has surged over 300% this year due to its strong government contracts and potential to expand into private sector data analytics. The company's ability to process government data uniquely has created sticky revenue streams. However, the stock trades at 156 times earnings, indicating high expectations. While growth potential is significant, the stock's volatility and high valuation suggest caution for investors.
What sectors are expected to perform well in 2025, and which ones might underperform?
In 2025, growth sectors like technology are expected to perform well, while safe sectors like consumer staples and healthcare may underperform. Healthcare, in particular, has been weak due to margin pressures and concerns over drug pricing. However, stock-picking opportunities exist within healthcare, such as Gilead Sciences and Bristol-Myers, which are showing signs of recovery.
What is the outlook for NVIDIA's stock, and what factors could influence its performance?
NVIDIA's stock is currently trading sideways, with investors awaiting clarity on future growth, particularly related to its Blackwell chip and AI demand. The stock's valuation has dropped from 44 times earnings in June to 31 times, reflecting uncertainty. While NVIDIA remains a leader in AI chips, its performance will depend on maintaining its technological edge and continued spending by major tech companies on AI infrastructure.
What are the key concerns for the bond market in the near future?
Key concerns for the bond market include the positive correlation between stock prices and treasury prices, which reduces diversification benefits. Additionally, narrow spreads between treasuries and corporate or high-yield bonds are worrisome. Investors are watching whether treasuries can provide the traditional downside protection during market downturns, as well as the overall stability of fixed-income markets.
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