Markets are red today–but generally it is a very orderly red move. The S&P500 is down about 1/2%, but has been trading at this level for a few hours. Seems that the ‘traders’ are fighting over nickels and dimes–all the real buying and selling is done for the year–no big money is waiting in the bushes to snag a bargain at 1 p.m. (central) on New Years Eve.
For myself I have just been pondering a realistic approach to 2025. By realistic I mean expectations of what a conservative guy like me can expect to garner in gains (I don’t plan for losses–I don’t invest to lose money so I am not going to plan on it). I did settle on a lowly 6% target for 2025–down from what has been my forever target of 7%. It is just logical that with a bunch of CDs and money markets funds at 4.xx% and a bunch of high yield issues in the 8% area that 6% the right realistic target. Of course I do remain exposed to some perpetual preferreds — although at a muted level from few months ago so I have some downside and upside potential.
Now given the high level of uncertainty in my crystal ball I am not going to even try to plan for anything except the 1st quarter of the year. For the 1st quater I am looking for the 10 year treasury to trade in a range of 4.25% to 4.75% as economic data remains relative strong–i.e. 2% GDP growth. Employment may also remain pretty stable as data shows the consumer continues to run up their credit card tab. Inflation remains at the current levels–plus or minus .1 or .2%.
So the big question I have–and which is unknowable is will the congress give any signal whatsoever that they will reign in spending? I have my doubts-BUT any real signal that they will lessen the deficit would be welcome in a big sort of way—equity markets spiking higher and interest rates moving sharply lower. Is this even possible? I have no earthly idea–but I do foresee some real battles which may upset markets.
Happy New Year to all!!
I can reliably predict the continuation of massive money printing in excess of revenue by Treasury to fund the gov’t. I wish Bessent good luck.
Fed is going to have to do QE on long dated treasuries and the dollar needs to get pushed down. Relatively the dollar might remain strong because almost every other currency is still the dirtier shirts.
Forcing people to buy long dated treasuries would definitely be a wake up call for the debt problem.
I’ve gone deeper into cash, and do not trust the way things might go over the next few years. Overvalued drivers of markets (Top 7, really SEVEN???) that drives momentum-until it crashes it). Global political and economy issues. Azure’s post of credit defaults I think it telling.
I’ve kept a few medical and less (I hope) crash sensitive stocks (but they all go down). I did add some downside protection recently with FETH (like it better than bitcoin as I think it will gain value for ability to do contracts/tangible items etc. – but it’s easy to argue BTC will be the bigger mover). Also bought SMDD leveraged for mid S&P. Not alot, but a safety net, maybe?
Still heavy in pref’s which I think are safe.
“will the congress give any signal whatsoever that they will reign in spending”? Congress will definitely talk the talk—each and every 535 of them. In reality, what sector is even politically possible to implement a cut in spending? As best as I can tell, none of them. Consequently, unless the economy goes into a serious recession, interest rates will remain high for the foreseeable future. I hope I’m wrong.