What to Watch in the Markets the Week of December 16th
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This episode is brought to you by OutSystems, the AI-powered application generation platform that combines the speed of Gen AI with the power and completeness of the market-leading low-code platform. Visit OutSystems.com to learn more. This is Barron's Live. Each week, we bring you live conversations from our newsrooms about what's moving the market right now.

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 Lauren Rubland, Senior Managing Editor of Barron's. Thanks for joining us today for a market update and a look at the week ahead. It's a rainy day in New York, but it's been a sunny one in the markets where stocks are rising yet again.

My guest today is Barron's deputy editor, Ben Levison, who did double duty last week as the writer of our weekend cover story, Why the Stock Market Could Gain Another 20% in 2025. Ben, as your editor on the story, let me say again, great job. And also, welcome to Barron's Live. Okay. So to kick things off, I want to do two things today. First, I'm going to ask you to recap the story for anyone who missed it.

especially the part about why investors should embrace the bubble, as you say. And then I'm going to ask you to pick apart your own argument and tell us what could possibly go wrong this year. But let's start with the positives. Give us a rundown of the bull case for a 20% advance.

sure so you know when i started reporting out this story i actually went in with kind of a negative hypothesis i looked at you know we had 20 something percent gain last year we're going to have a 20 something maybe 30 gain this year um and that got me nervous um and again we had the the narrow breadth of the market and all that kind of fun stuff but the more i talk to people the more i realize that you know what i might

just be wrong, that there's a lot that can actually still go right and that actually people tend I should say investors, they tend to extrapolate a lot of good news. So things can actually get a lot. Markets can start pricing in a lot more good news than may a lot more quickly than maybe they should.

But as an investor, we still have to trade that market. And so when I talk to people, there's two things stood out. One is that the AI trade is really just getting going. By the trade, I mean the possibility that the market is going to pull forward productivity gains for all kinds of companies.

If productivity is going to be better in the future because of AI, margins will get better and that makes companies more profitable. And for markets, the problem is one of my sources told me is that they don't know how to price this in as a gradual thing. It's something that they look out and they say, okay, we're just going to price it in now.

And that really sets the potential for the market to go up a lot higher than maybe it should. But it serves as fuel for the rally to continue. And then the other side of it was

And this came from a couple of places that we're going to see deregulation. And probably the one person's comment is probably the biggest deregulation since Reagan and when he took office in the early 1980s. And that kind of deregulation combined with the AI phase.

with the AI stuff is really going to fuel this market. And so again, if earnings are going to be continue to be strong, if and if margins are going to get better, you can have a market that's expensive, like it is now it's over 22 times, but it could get even more expensive.

And that just led me to feel like, hey, you know, we're going to probably have another good year. And it's going to be really uncomfortable for all of us, like myself, who say, you know, this shouldn't be happening. Stocks are too expensive. People are extrapolating things that they probably shouldn't be. But sometimes you have to trade the market as it is rather than as you want it to be. So I'm going to flip this around and ask what bears ask. Well, what about

those tariffs, won't they spark inflation? Won't that mean the Fed won't cut and won't that mean that stocks will fall? Well, I think tariffs as an issue is drawing a straight line between tariffs and inflation actually is probably not the best thing to do. We actually didn't get that the first time Trump raised tariffs, you know, for numerous reasons.

And so we don't quite know what's going to happen. We could get inflation off of that, but not necessarily. There are other trade-offs that happen because of it. And so I'm going to say tariffs are a risk.

Things like deportations are a risk. Trump policy, there are a lot of risks. And they are like, if I'm making a checklist of all the things that could go wrong next year, and even things that will cause volatility next year, tariffs, possible deportations, all this kind of, I'm going to use the word chaos, and I don't mean it as a bad way. It just means a lot of change in this case. There's a lot of change, and it's not going to be a predictable change.

And I think that is going to cause a lot more volatility next year as well. But actually, that's something we've seen before in the during the dotcom bubble. You actually had a rising market with rising volatility, which Ben Bowler, who's the who's a strategist at Bank of America, he says that that's actually a symptom or a sign of a of a bubbles when you see a market going up with increasing volatility.

And so if we see that, then we'll know that really the bubble is inflating in quite meaningful way. So David Rosenberg of Rosenberg Research wasn't the only person to read your cover story and draw a link to the so-called cover curse. And that's the idea that when things are so well observed as to make the cover of a national magazine, and we are a national magazine, that implies the trend is peaking or over. But

He might be the only person to suggest buying a pacemaker as a hedge against bubble embraces, which I thought was a pretty funny line. So let's talk a little more about what would cause you to rethink your call next year.

Sure. I mean, I think that the start of it has to be something that happens to the economy that, you know, that right now everyone's pretty optimistic about the economy remaining strong. That I don't I think most people would say that the Fed has engineered a soft landing.

If the economy, though, slows down and there are people who think this, one strategist I talked to is Peter Bereson at BCA, who has one of the lowest targets on the S&P, I think may have the lowest target on the S&P 500 for the year. I want to say it's below 5000, but I'm not quite sure.

sure i can remember off the top of my head um but uh part of that is because he thinks that uh the economy was is already heading into a recession that uh you see that in the jobs numbers um that uh um that the unemployment rate is rising um and that you'll continue to see that um and that uh

Donald Trump's policies are just going to add to the pressures there. So I think the weakness in the economy is one possibility. I think the other side of it is inflation. The Fed is still standing by this idea that inflation is coming back down to its target. The inflation prints that we got this past week from CPI and PPI show more of a stall

that it's come down a lot, but not to the Fed's target. And it may not be going that much lower. Of course, the Fed is looking at PCE, which has a different makeup. And we'll get that this Friday.

We'll get that this Friday. And I think you had a good description of it kind of as CPI is being sort of like the Dow. It's the one that everybody watches, but it's not more as meaningful these days as look at the S&P 500, which in this case would be the PCE. So we have to watch that PCE. But inflation would be the other thing. If inflation really starts to tick up or, you know, show signs of heating up again, that's going to be a problem. And then, of course, it is, you know, when you're dealing with inflation,

with something like with a market bubble, like I think we're heading into now, bad news from someplace, something like an NVIDIA. It's like, oh, you know what?

there's just not demand for these chips anymore. That's going to cause a big issue. I think that there will be people trying to read all those tea leaves that are going to cause volatility. And you know what? If that really, if you do get that kind of number that says, hey, demand isn't great anymore, you could really see a big drop in the stock market. That's like you would get an air pocket, which I suppose is the inverse of a bubble.

Yes, I think that you would get a pop very quickly and stocks would come tumbling down because there is a it's not just in the tech sector and tech adjacent companies, but I think that there's a lot of AI froth getting priced into the market. A lot of embedded enthusiasm. So let's abandon discussion of next year and talk about next week for a moment.

It is a very big one for the Federal Reserve, which has its last policy meeting of the year on Tuesday and Wednesday. The Fed is widely expected to lower interest rates by another quarter of a percentage point.

And it is also expected that there will be some dissension this time among Fed officials about whether this rate cut is really necessary. Some of that may come out in the Fed's summary of economic projections and the dot plot of rate forecasts. So tell us, why is the Fed going to cut rates again when inflation does seem to be sticky to ticking up? And what do you expect Fed Chair Jerome Powell to say about the road ahead?

Well, I think what the Fed set out to do is, you know, Powell always explained the rate cuts not as something necessary because we're heading into a recession, but just to recalibrate where rates are. So they were well over five and he wanted to bring them down a full percentage point by the end of this year. And so we got the half point cut. We got a quarter in November. We're going to probably get another quarter at the December meeting.

After that, all bets are off. There are people talking now about a hawkish cut that Powell will go ahead and convince everyone that a quarter point is OK, but that the pace is not going to be what people have thought and that we may get some meaningful pauses along the way. And that's where the step comes in.

You know, Deutsche Bank, I was reading a note this morning, and they think that you're going to see the economic forecasts going up. So both growth and inflation, they're going to be going up. Unemployment will probably get revised lower.

And that the Fed will adjust how many rate cuts it expects and the timing of those. And so anyone who's expecting, you know, four or five, six cuts probably isn't going to get them. Deutsche Bank thinks there'll be three cuts next year, but they're going to but they think the risk is towards fewer than that. And they think it's going to be over a longer period of time.

And they think that the final landing place is going to be higher than people expect. And I think it's going to be Powell's job. I mean, the one thing he's done, I think that we as investors remember this, is that he's actually done a fairly decent job of adjusting when he needs to adjust. And the market has done a decent job adjusting to that. So remember at the beginning of the year, I think it was six or seven rate cuts were expected.

and fairly early on, and that's not what we got. And they kept getting dialed back from there. But the market handles it okay. And Powell, again, kept explaining why we're going to do what we're going to do. And I think the market can handle it if, again, the Fed is able to explain this is where we think growth is. We are worried about inflation because the market knows that if inflation comes back, it has a problem that I think the market can handle that.

If he does, you know, a decent job of explaining why he's doing what he's doing. Well, I would say the word of the year from the Fed is recalibration. And Powell's been the great recalibrator. As you know, the market has pretty much gone along with that. So how do you think the market would trade that so-called hawkish cut?

I think part of it right now is that there's a notion that people are actually pre-trading the meeting. And so you have things like the dollar being strong, treasuries being weak, and then you have weakness in small cap and value, that that's probably been a

a market recalibration to what the Fed is going to do and that once the Fed does this hawkish cut, those things could come back.

And so I think that's something to watch at meeting this week. But again, then we're going to have to pay attention to what does the Fed say about the beginning and is the market okay with that? Does it still see earnings growing? Does it see margins remaining at least stable, if not expanding? And those are the kind of things that are determined whether the stock market can keep going up. And I think it can work through all that.

Fed Chair Powell will begin his press conference at 2:30 on Wednesday, and we will all be tuning in at Barron's. And what color tie will he be wearing? Is that an indicator of where rates are going? Apparently. Oh, okay. What about a purple tie? What does that mean? It means he's as confused as the rest of us. Right. Okay.

All right. Let's talk about earnings this week. Perhaps a less confusing subject, but we'll see.

FedEx reports on Thursday, and the company is sometimes considered a bellwether for the economy. What is Wall Street expecting from FedEx this time around? It's funny. I'm not sure FedEx is really considered a bellwether anymore, or UPS for that matter. There are companies that do a lot of shipping, but the way that the economy works now is just quite different than it ever used to be.

What's strange about FedEx is that it's really not about the earnings. The company is supposed to grow earnings from $4 to $4.02 from $3.99. Revenue is supposed to drop just a teensy little bit.

But when you look at the strategists there, none of them are really paying all that much attention to the earnings. JPMorgan is saying, look, Express has been an issue. There have been headwinds there from mixed shifts and weak demand. And they had a USPS contract, a postal service contract that was lost, things like that. And they're trying to do all this stuff to cut costs.

and increase prices. But that's not going to matter because what is going to matter is that there has been talk of a spinoff of the freight business.

And that has gotten people semi excited. I mean, the stock's not doing great this year. It's up 2.6% in the last three months, 13% this year. But it's this freight spinoff that is really getting attention. There are people who think that if you spin off the freight business, it could be worth a lot more as a separate company. You can compare it to something like an XPO or something, and that would unlock value.

But, you know, there are others like, you know, Citigroup is saying that they actually think that there's a lot of execution risk and they don't think it's actually in the best interest of long term shareholders. They think that Express and the freight business should stay together. So I think that's what people are really going to be paying attention to. And unless the number is a blowout one way or another, it's going to come down to those comments. Are you putting odds on a spinoff? What do you think will happen?

- Wall Street loves spinoffs, anything that generates fees. - Well, they generate fees, right, exactly. - Generate those fees, please. But I think that the company probably is better off as one company and there have to be synergies between that freight and the express business.

Okay, good assessment. Nike also reports on Thursday, the company has a new CEO, but it seems to be dogged by the same old problems, among them weakness in China and competition. The stock has had a pretty awful year. It's down almost 30%. Is there any glimmer of a turnaround yet at Nike?

I'm not sure there's a glimmer yet, but I also think that the new CEO is too new at this point. I look at all the great turnarounds. It took Larry Culp a year to really start getting traction at GE, which was a much bigger turnaround than Nike is. But Nike has its problems. You look at the stock.

It hasn't done well. It's down 28% this year, down 2.3% over the past three months. It was a baron's pick, and we got it wrong. It's been not a good one for us. Earnings are declining still. It's expected to report $0.64 versus $1.03 a year ago. Sales, too, are expected to be down. And there's just been a...

just a lot of problems both with they're having new shoes, but the you know, they're not really gaining enough traction yet. But they also have this their classic stuff, the Air Jordans and what just aren't doing as well as they were. You mentioned China.

China is still a problem. They're still having to push, you know, they're using a lot of promotions to get sales there. And, you know, so I think a lot of this is just going to be the company having to, you know, we'll use the recalibrate word. Why not? You know, if the Fed can do it, so can Nike. But I mean, the CEO, I think the one thing that really should be said is that this is a guy who knows Nike. The departed CEO was at eBay.

and was sort of supposed to bring Nike into the digital age. This is when they did the bet on the direct-to-consumer model at the expense of everything else. I think what we're going to see is that broadening

Again, into lots of different sales channels. But they have a lot of work to do. And I think that's going to take some time. And so I'm not terribly excited. What I'd love to see is just Nike stop the bleeding. You know, 2.3% over the last three months compared to the fact that it's down 28%. You know, that's...

That's something. That's a glimmer. That is a glimmer. So let's see if they can continue to at least find some support in the stock. Maybe we do get that China turnaround at some point, and that could really help things. But I'm not excited about the stock right now.

Ironically, it may be that the issue wasn't so much coming into the digital age as better designs to match the competition. Yeah, I mean, Teresa, you know, she likes to write about what she calls the ugly shoe trend.

You know, Nike has always been kind of stylish, and now people are wearing it. I see this with my son. My son wears Crocs with socks. It makes me horribly sad. But he's young. He'll grow out of it. I sure hope so. You know, people love their Crocs. They love their Birkenstocks. They love their Hoka's and their Uggs. They love what Teresa calls ugly shoes. And

all these different brands and then on is doing on um uh which is i guess the swiss company they're not ugly but they're very popular um it's just nike hasn't called hasn't been able to sort of keep up and stay in the in the in the conversation as well as it used to um

And yeah, so look for those ugly shoes. Well, the secret to ugly shoes is that they're also comfortable shoes, but the secret to Nike may just be recalibration. That's right. As you say. All right. Moving on to Micron. The company reports Wednesday, what is on the docket for this maker of memory chips?

Well, people are hoping that it's going to do something like Broadcom did this past week, where Broadcom came out with numbers and jumped 24% or something like that. Hoke is not a strategy. Hoke is not a strategy. I mean, the stock, you know, this is, Micron stock has kept up with the market this year, close to it. It's up 27%, but 25%, it's gained 25% over the past three months. So

So really, it's a stock where all the gains have come recently. There are these expectations that things are going to be better in the future. And again, with AI helping and that they're going to get some pricing in the memory stuff that will help and whatnot.

But it's interesting because even reading the bulls, so like I was reading a Stifel note and they were saying that they're they're actually cautious in earnings, but they still have a buy rating on it because they see things start to spring back in the second half of the fiscal year for micron. And so they're getting they're ahead of that.

And I think that's what we're going to have to see. I mean, the one thing about the stock, and if you look at it right now, it's been trading sideways. You know, it's gone. It went up a lot early in the year. It went up to about 155. It's at 110.

10-ish right now. It's sandwiched between a 50-day moving average and a 200-day moving average. So this number has the potential to send the stock either upwards through its topside resistance or down through its support. And honestly, I'm not sure which one it's going to be. I do know that today, it seems like there's starting to be pricing and some good news. The stock is up 7%. And the more it goes up before the number, though, the more I'm going to start to worry.

We'll keep an eye on that coming out Wednesday. So Carnival is a stock that has really kept pace with the market. But again, most of the gains have been in the past three months. The company reports on Friday, this is the cruise operator. How are things looking for Carnival and how are things looking for the cruise industry generally?

No, they're looking okay. I think a big part of the story for them is not only is the business doing well, there aren't a ton of players, so it's not quite a duopoly, but there aren't a lot of people doing cruises. Travelers are signing up, business is good. And what these companies are doing, they had to take on a ton of debt just to get through COVID.

They couldn't run the cruises. And to stay in business, they loaded up on debt. But they're paying that debt off now. And paying off debt can be a powerful fuel for companies. And so I think you can see...

more upside in these stocks. And Carnival was a pick from, again, Teresa. She's really been a fan of them. And Carnival is only now getting, you know, it's only now back to where it was in 2022.

And it's still below where it was. It's about half of where it was in 2019, right before COVID, actually right at the beginning of 2020. Honestly, it's a wonder these companies survived COVID. It's amazing. And now they're turning around and they're very well operated. They're keeping an eye on costs. They're not building a ton of ships. They're just trying to pay down that debt, cater to their customers and be solid companies. And

If they continue to do that, I think there is more upside here. You know, the company Carnival is expected to report a profit of seven cents. They reported a loss of seven cents a year ago. And its sales are not up a ton, but they're up. They're going to be at expected to be at about five point nine four billion. That'd be up from five point four billion. So, you know, you look at a decent growth in sales, nice, solid growth in earnings.

And, you know, there's a chance then with that debt getting paid down for, I think, to fuel some real opportunities in the stock. And I imagine if the market goes up 20% next year, as you expect, that will be good for the wealth effect and more people will sign up for cruises. That would be my guess. That would be the plan. All right. So, Ben, before we go on to listener questions from this week,

I want to go back to a few that were asked last week on Barron's Live. I was away, but you were hosting the call. Listeners had a batch of questions about the investment prospects for several well-known companies. And I thought we would do kind of a quick round robin. I'll throw out the name. You give me a quick take on where you think the stock is heading and what the story is. So let's start with Palantir. Lots of questions about that. What a performer this year, up more than 300%.

What's next? Yeah, I wish I knew. What's funny is, you know, Jacob Sonnenschein, who's one of our stock pickers, wanted to pick this back when it was under 25 and now it's at 75. And we were just too slow. It moved so, so quickly.

It's just nuts. You know, I think that's the issue with the stock. It's gained 101%. It's doubled in the last three months. It's up 325% this year. Let's talk about why for a moment, though.

with them yeah i mean i talked to andrew about this he calls it a cold stock but i think what's going on is that the company has um the government is its biggest source is its biggest customer it has it's able to take government data and really sift through it um probably in a way that nobody else can um and

I'm guessing it's used by all kinds of government agencies that we can all use our imagination about. And that's pretty sticky revenue. But I think the hope here is that Palantir is going to be able to take these products that are being used by the government and bring them to private companies. And that they'll be able to, that private companies will come flocking to them because they want the same kind of data crunching that Palantir

that the government has. And if that happens, if the potential for earnings to grow and sales to grow is off the charts, but it needs to be off the charts because right now the stock is trading at 156 times earnings, which is,

Not cheap, we'll just say. That's not cheap. I guess you could say much of the good news may be in the shares. That's right. So you do have to wonder if there's going to be a pullback soon. And it's a volatile stock. It really is. It's one that you have to be careful, I think, with your entries and your exits. It's a good one, but it doubles hate.

you can take a little bit of profit there and still have a very nice stake in the company. But yeah, it's a cold stock right now that is doing very, very, very well. - But the computing power in this country, it's hard to believe they're the only game

in this business, but we'll find out next year whether anyone else has surfaced. All right. On the other side of the spectrum, Occidental Petroleum, the stock is down 21% year to date. It has been purchased repeatedly by Berkshire Hathaway. What's been ailing the shares? You know, it's really hard to say. I think part of it is that it has a decent amount of debt.

Its dividend is a lot lower than other oil players that have similar kind of metrics. So it pays a dividend, I think, of about 1.7%. And you can get a much higher dividend from oil companies. And I would even think that Buffett has been an issue as well. That he was at one point buying a lot of stock and he stopped even as it's dropped.

And if he was really optimistic about the company, maybe he'd be buying. So I think you just fold that all together and they're just safer, more exciting oil companies right now. We're in a market where oil prices have fallen. And so you would want to, if you're going to be in a market that has falling oil prices,

which oil companies would you want to own? And I think people are probably gravitating to some of the larger ones and some of the safer ones, even with Buffett backing Occidental. But I want to say that this is one that Andrew actually plans to look into and explain what's going on. So be on the lookout for that.

All right. Duly noted. I wanted to talk about some sectors for a moment. We had a number of questions this week about market sectors, which ones look strongest for 25 and which ones might falter. So I'm going to consolidate the inquiries and simply ask you to explain which sectors you like for the next year and which are your not so favorites.

all right so i'm talking to people you know what i keep hearing is that if we're going to have a really strong year you don't want to be in the safe sectors um so that means things like consumer staples which if you know an okay year it's a up 15 percent um which has underperformed the market but you know given how strong the market has been you would kind of expect it the one that

What people are really split on is the health care sector. The health care select sector spider ETF is up just 3.2% this year. Of all those spider sector ETFs, which is how I tend to look at the sectors because that's the easiest way for investors to actually go play them, that's the worst performer this year.

And, you know, part of that is it's a safe sector. Part of that is, you know, you've seen a lot of weakness, actually, since the United Health Care, the head of the United Health Group's insurance business was murdered. Just I think people are worried about that.

the margins staying high, push back on costs and things like that. And it's probably spreading to some of the drug stocks as well, where there's going to be, you know, again, talk about why are these drugs so expensive? But I think there are opportunities there that, you know, investors, you know, it's one where it's if you're looking to do stock picking, it's probably not a bad place to do it.

because there are companies that are doing interesting things that have been out of favor before healthcare fell out of favor. Like one that I like quite a bit is Gilead Sciences. It was, you know, huge back in 2016 has been sort of wandering into the desert for the past eight years or so.

But it's actually rallied quite nicely this year, especially in the last half of the year. And it's trying to get back to those levels that it was at in 2015 and 2016. So it's one I'd keep an eye on. Today, Bristol-Myers got an upgrade. There's some drugs coming that the analyst was very excited about. And it's another one that hasn't done great recently.

if I remember correctly, but it could be an interesting one to look at as well. I mean, it's well down from where it was in 2023 at the end of 2022. You know, it's gone from it's lost about lost about half its value and is still down about 25% from there. And so that could be another interesting one to watch.

All right. Sounds good. I want to go to this week's questions. We'll see how many we can get through. We had a question from Jeffrey about whether there are any reasonably priced retail stocks like Gap or should investors just stick with the TJXs and Costcos of the market? Funny he should mention Gap, correct?

well gap was one that we liked um you know teresa picked that a week or two ago um and it's one that uh potentially i you know they can keep doing what they've been doing which is cutting costs and fine-tuning their brands they could do okay i think uh you know when you talk to

portfolio managers. I was at a launch from a company called Vontobel last week. And one of the things they talked about was, you know, how they manage their portfolio of stocks and what do they do? I asked, you know, what do you do when one of the stocks gets very expensive?

Now I was thinking of Costco. They talked about Walmart and they said one of the things to do is, you know, they they have buckets of expensive stocks and they have a bucket of cheaper stocks. And when the expensive stuff gets very expensive, they reduce the position, not completely, but they take some of those profits and they put it into the cheaper stuff. And I suspect that that's

That's a decent way to do things in retail right now. Finding the retail stocks like a TJX that is doing quite well, the stock has been outperforming.

And balancing that with some of the stuff that hasn't been doing as well is probably a decent way to handle things. But with the stuff that isn't doing great, you have to be careful to avoid those value traps. I mean, what we liked about Gap is that they're showing signs of improvement, and that's what you need to see. It's when they start talking about cost cutting, when they start talking about seeing the possibility of raising earnings guidance.

Those are the kind of companies that you want to be looking at in the cheap bucket because you don't want to be stuck in the ones that are just cheap for a good reason. Anything that hints at debt pay down is worth listening to. Anything that hints at margin expansion.

Absolutely. Two good things to pay attention to. Looking more broadly at the market, Bharat has a question. Is the SPYG, which is the S&P 500 growth ETF, better than the S&P 500 ETF or SPY? Or should a person invest 50% in each? Seems to me if you invest 50% in each, you've got a lot more than 50% in the same stocks. But what is your view?

Yeah, I would agree with that. You know, the SPY at this point is heavily tilted towards growth just because the Magnificent Seven

has done extremely well. So yes, you would have done better in the SPY growth portfolio. I guess it's the SPDR portfolio, S&P 500 growth ETF, SPYG. You would have done about nine or 10 points better

um this year but if you go half in each you're you're amplifying um the bet on growth stocks um and that's been a very good bet for certainly the you know 23 and 24. um but when it doesn't go right you look at something like 2022 when we had a bear market spyg dropped almost 30 percent

and that was far worse than the the market itself so i do think that um it's better to you know

not try to amplify the bets that are already being made. You know, the SPY dropped only eight, I should say only, but only 18%. So that 10 percentage points that you gain like this year, you would have lost in 2022 if I'm making any sense whatsoever. But so, you know, one of the things that I do think is that one way that people think about portfolio allocation is that you have something like a core and a satellite. So you own something like an S&P 500,

And then if you want to if you do want to amplify the bet on growth stocks, well, OK, add a little bit as a satellite to that S&P 500 core position. Or if there's a particular sector or a particular stock, you could do that. But you're still maintaining that very large position to the S&P 500, which acts as kind of the ballast for the portfolio.

And I think that's a decent way to think about things. You know, right now I would actually be thinking about adding not more growth stocks, but maybe think about adding more more value just because, you know,

at some point you're going to want that value, though it hasn't paid off for, what, 10 years now? You know, paid off in 2022. And so you could buy something like the SPYV, which is the SPDR Portfolio S&P Value ETF, which hasn't done all that well, but perhaps is ready for a rebound at this point. It's only gained about 15, 60% this year. I like that notion of satellites around the core.

Yeah, it was one when I first heard about it. I was like, oh, this is interesting. It's a good way to think about things. Another way to think about it is diversification around the edges. And that's really what you're doing there. So Carlo has a question that's somewhat related to this theme. Will the market broaden next year or are we limited to high tech for the foreseeable future?

God, I hope so. You hope so what? I hope we get the broadening out. I mean, it was so much fun until about two weeks ago to see everything except the big tech stocks go up and, you know, see the big tech lag. And it's like, oh, this is nice. This is how it's supposed to work.

And then, of course, we get the last two weeks where it's big tech all the time. I mean, again, this is an example of where I think having exposure to both, like almost as a barbell is a good thing. When I was talking to people for the cover story, one thing I came away with is that you're probably going to still see really good performance out of the Magnificent Seven or at least members of the Magnificent Seven because they don't always move in the same direction all the time.

you know, until this bubble pops. And so you need to own those guys. But I think it also makes sense to look elsewhere and try to find those, you know, get some of the exposure to that broadening that is possible. And because I think there's a potential for lots of rotations in the market that's coming here where it goes from, hey, we love the Mag 7 to, hey, there's some other stuff and back and forth.

All right. We have two minutes left approximately. I'm going to ask three or four questions and ask you to give me about 30 seconds each. Where's NVIDIA heading? So, God, that's a good question. I think right now... We probably should come back to it next week. I mean, NVIDIA is still the company in the market. It's

It's right now trading sideways. It goes up, it goes down. It briefly hit an all time high, but didn't hold it. It fell right back down again. And it's been doing this really since June. And I think that investors are, we saw this when it released earnings a month ago, I guess it was something like that now. You know, everyone thought it was going to have a huge move after earnings because it was going to settle the debate of whether there was a

more growth ahead or whether growth was going to be slowing ultimately and it didn't answer the question and so the stock was fairly muted um and it's been just going back and forth um you know up and down and up and down uh since then i i think that um the stock ultimately resolved itself higher but i do think it could be sort of stuck in this trading range until you know blackwell chip comes out is it really that much better than these other chips and what about the other the chip that comes after blackwell because they've started talking about that too

So are they going to be able to keep maintaining this edge over other companies? And then we have to look at whether the Magnificent Seven are going to keep spending on AI chips. So there's a lot going on there, a lot of questions to answer. I think it does ultimately get resolved higher. Valuation right now is falling on AI.

The stock has dropped from about 44 times in June to about 31 times now. And I'm just going to let that valuation come in. Maybe you pick it up when it drops under 30, something like that. But just it's going to be sideways. And that's what we're going to have to just keep an eye on for now.

Got it. That was more than 30 seconds, but it was well worth it. I want to close very quickly. We had a couple of questions about the bond market. Andrew Barry will be writing his big look at fixed income markets. I think that comes out the beginning of next year. But give us a sneak preview. How are you thinking about bonds these days?

you know the the biggest issue with bonds for me is that you still have a positive correlation between um the stock market and uh treasury prices and so you're not getting the diversification there um that one would hope for um and so we need to see if

I think that's what we have to look at. Is it going to be our treasuries especially going to be able to provide that downward protection that it has historically? The other issue is just that the spreads between treasuries and corporate and high yield bonds have gotten very narrow. That can be worrisome. So we're going to be looking at those. All right. We have a couple of crypto questions. We're going to save them for next week.

And speaking of next week, Ben, I want to thank you for another informative call. I wish we had more time to talk on Barron's Live. There's so much to discuss. I want to thank our listeners for sharing a bit of your Monday with us. We really appreciate it. And please join us again next week. It's the last Barron's Live call of 24. Ben and I will be on the line. Our guest will be Ed Yardeni of Yardeni Research. Ed was bullish about the markets all through this year.

and drew on a lot of data to build his case for what he calls the Roaring Twenties. I am eager to hear whether he thinks stocks will roar through 2025 as well, and if so, why? We will find out together next Monday. Thanks again, everyone, and thank you, Ben. Have a good week.

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