This is The Takeaway from Briff y Bore today, that you can sign up to receive in your inbox every morning along with:
On really bad days for the stock market or long periods of selling, it's good to have a reliable playbook.
Think of it as a guide to keep your sanity in the midst of the chaos and, hopefully, your portfolio flush with long-term returns.
To me, the sold-off playbook is a two-pronged exercise honed over years of reporting business news.
First, talk to the smartest people I know in markets and business. What do they do and say, and why? Do they sound or look scared?
And two, think deeply about whether something has really changed in the market or whether investors are in for sensational headlines.
Suffice it to say, I had to dust off this popular playbook this week. The final assessment: Relax, folks, this isn't the start of a bear market even though the tape feels punishing.
Why, you ask?
Many of the smartest people in the room, so to speak, have valid reasons to be long on stocks AND the economy isn't falling off the cliff AND we're still likely to get rate cuts in 2025 AND we have business in favor of a president in Trump taking office in less than a month.
“Big picture, with record earnings, record margins, strong productivity, and overall improving consumer and small business sentiment, it's hard to think this bull market is over,” Carson Group chief market strategist Ryan Detrick tell me
Truist's co-chief investment officer said Keith Lerner“The bull market is still intact, but we are seeing a short-term gut check.”
Gut check, indeed.
The Dow Jones Industrial Average promptly ended Wednesday's session down more than 1,100 points. It rose slightly on Thursday, but renewed selling pressure on Friday.
An index of 30 well-known stocks such as Salesforce (CRM) and Disney (DICE) off nearly 4% in December as losing streaks began to pile on one another amid renewed uncertainty about rate cuts.
What has spooked the markets is that the Fed has not committed to aggressive rate cuts in 2025.
The consensus among Fed officials is now for two rate cuts next yeardown from four previously forecast in September, as the monetary policy body remains concerned about the inflation outlook. The outlook for inflation is further clouded by potential moves by the incoming Trump administration, such as potentially inflationary tariffs on China.
“I don't see a lot of (economic) red flags. People are cautiously optimistic if they own businesses, whether they're small, medium, or large,” said San Francisco Fed president Mary Daly on Yahoo Finance Opening Offer podcast.
But again, nothing I heard from Daly suggested she was worried about the demand outlook in the US despite the fact that inflation is stickier than she and other voting members of the Fed would like.
“The Fed was hawkish but I think people are jumping the gun assuming rate cuts are over – that's not what Powell said (plus he just gave markets 100 bps of easing in 2024),” said founder Sevens Report Research Tom Essaye me.
“I think 2025 could start off a little bumpy as Washington could be a little dysfunctional (as we see it now) and the Fed is no longer so dovish, but I don't think either another is fatal to the bull market unless we are. seeing growth start to roll over.”
Then on the subject of demand, all signs suggest that the economy continues to do quite well and is supportive of strong earnings growth in 2025.
The AI thesis remains intact and will likely be a key driver of profits and valuation multiples in 2025.
“There are strong indicators that this could be a difficult year – and, possibly, decade – for the stock market. I'm going to be bold and say that we will see the opposite. I have no doubt that it will AI drives the stock market in the short and long term of their sector,” formerly Cisco (CSCO) Chief Executive Officer John Chambers has been identified this week as one of his 2025 predictions.
So, although things feel as if they have changed in the market this week, drill down and it looks like what has powered the returns in 2024. Nothing lasts forever , and stocks don't go up in a straight line — two phrases to live by in life and in investing.
Three times a week, I drive insightful conversations and chat with the biggest names in business and forward markets Opening Offer. You can find more chapters on our video hub or watch on your optional streaming service.
Brian Sozzi is the Executive Editor of Yahoo Finance. Follow Sozzi on X @BrianSozzi and on LinkedIn. Suggestions on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
