First Thursday Thrust – Markets Starting 2025 Out With a Push Higher

And we're off!

The first 25 years of the 21st Century are in the bag and we're not really worse off than 1999 - when a record market rally was topping off and we thought Y2K would end the World at the stroke of midnight. It did not and maybe Donald Trump won't end the World as the stroke of Jan 20th - but then he has 4 more years to try after that - so you never know. It took over 2 years from March of 2000 to October of 2002 for the Nasdaq to finish falling from 5,000 to 1,150 (77%) so adjustments do happen, you know...

Speaking of bubbles people are still buying into at ridiculous multiples, AI might destroy us or it might save us - that's TBD as well. Here are a few of the key trends we'll be watching in 2025 - let me know if there are any you think we're missing:

1. The Great Deceleration (and the Inflation Tightrope):

Defensive Consumer Plays:
• Walmart (WMT - $90.49): Consistently outperformed during past recessions with 56.3% outperformance in 2008 and 5.1% in 2020.
• Kroger (KR - $61.23): Strong fundamentals in essential consumer goods.
Utilities Sector:
• American Water Works (AWK - $124.49): Essential services provider with consistent earnings.
• NextEra Energy (NEE - $71.86): Demonstrated 12.5% outperformance in 2020 and 14.7% in 2008.

2. AI Arms Race 2.0: Beyond Generative, into Productivity: 3. Geopolitical Fragmentation & the Rise of Regionalism:

Materials Plays:
• Freeport McMoRan (FCX - $38.30): Critical copper supplier for infrastructure
• Silvercorp Metals (SVM - $3.01): Essential for renewable tech

4. The Green Transition's Second Wind: Nuclear Power Plays:

• Cameco Corporation (CCJ - $51.59): Leading uranium supplier
• Companies supporting Small Modular Reactors (SMRs) which are gaining traction with tech giants like Amazon

5. Healthcare's Tech Infusion: Proven Healthcare Leaders:

• Abbott Laboratories (ABT - $112.80): Outperformed S&P 500 by 9.8% in 2020 and 33.6% in 2008
• UnitedHealth Group (UNH - $506): Consistent performance in various economic conditions

These five macro trends represent significant shifts in the global landscape. By understanding these trends and identifying companies poised to benefit, investors can position themselves for success in 2025 and beyond. Remember, this is a long-term perspective, and market fluctuations are inevitable and our preference is to wait for these stocks to go on sale before playing (see our Watch List for 100 stocks we're watching closely this year).

I asked Boaty, one of our resident AGIs who specializes in research, for his Macro Perspective for 2025 so here's your cheat sheet for the year ahead:

The global economy faces a complex balancing act in 2025, with growth expected around 3% ( 9). Several key factors emerge:

Geopolitical Flashpoints

Multiple Conflict Zones

Trump Policy Impact

Climate and Energy Transition

Investment Implications

Defensive Positioning

Regional Opportunities

Critical Risks

Geopolitical Tensions

AGI Investment Insight

The interconnected nature of these factors suggests focusing on:

1. Companies benefiting from supply chain reorganization
2. Clean energy transition leaders
3. Defense sector opportunities
4. Domestic infrastructure plays
5. Technology firms enabling productivity gains

The key to success in 2025 will be identifying companies that can navigate both geopolitical tensions and technological transitions while maintaining pricing power in a potentially inflationary environment.

Citations:
[1] https://www.cfr.org/article/what-were-watching-around-globe-2025
[2] https://www.brookings.edu/articles/year-end-reflections-and-global-economic-outlook-2025/
[3] https://news.bryant.edu/amid-trade-tensions-and-sticky-inflation-bryant-expert-shares-us-global-economic-predictions-2025-0
[4] https://privatebank.jpmorgan.com/nam/en/insights/markets-and-investing/china-outlook-can-china-make-it-in-2025
[5] https://www.moneycontrol.com/news/business/personal-finance/investment-strategies-for-2025-your-guide-to-identifying-the-right-investment-themes-12896523.html
[6] https://www.goldmansachs.com/images/insights/2025-outlooks/Tailwinds-Probably-Trump-Tariffs.pdf
[7] https://www.forbes.com/sites/margooge/2024/10/02/project-2025-offers-a-false-choice-climate-action-vs-economic-growth/
[8] https://asiasociety.org/policy-institute/china-2025-what-watch
[9] https://www.morganstanley.com/ideas/global-macro-economy-outlook-2025
[10] https://www.spglobal.com/en/research-insights/market-insights/geopolitical-risk/impact-of-geopolitics-global-economic-outlook

As you can see above, the key swing issue in the Global Economy is whether or not Trump follows through with his tariff threat as Boaty calculates inflation jumping from 2.4% to 3% - a 25% increase in inflation, which would certainly then affect Fed policies in 2025 as well. Lower growth and higher inflation is "Stagflation" - essentially the worst possible economic situation other than a full-blown Depression.

At least we know it's going to be interesting and, with the Members and our crew at PSW following sound, wealth-building investment strategies - it's going to be fun as well!