A Balanced Take on the Stock Market Outlook for 2025

Jeff Buchbinder (00:00):

Hello everyone, and welcome to LPL Market Signals. Jeff Buchbinder here, your regular host with my friend and colleague, Jeffrey Roach. Jeffrey, back from the slopes. How was skiing?

Jeff Roach (00:13):

Good time. Glad to be back watching markets, but it's hard to watch markets while you're going down the mountain, but had a great time. No broken bones.

Jeff Buchbinder (00:21):

Wonderful. I will not draw an analogy between ski slopes and the markets, because that could really mean bad things are happening, nor am I going to draw an analogy between my Kansas City Chiefs and the markets either. I think this is more of a Philadelphia Eagles type market. And I'll just leave it at that. Congratulations to the Eagles. So of course, it's the day after the Super Bowl, Monday, February 10, 2025, as we're recording this. We got a great show for you today. This is a really fun one, I think, to walk through. The Weekly Market Commentary this week, "Key Pillars of the Bull and Bear Cases." So we just pulled out, you know, five bull points and five bear points, and we'll walk you through those. The message from us here is really don't pick a side because certainly we think elements of both bull and the bear case will end up coming true in 2025. As we always do,

Jeff Buchbinder (01:20):

we'll start with a market recap. Tariff turbulence is my headline there. Probably the biggest reason why we were down a little bit last week, although earnings had something to do with it as well. And then we'll finish up with a preview of the week ahead where of course, Jeff, you know this data as well as anyone, so you can tell us what to look for in terms of the inflation reports out this week. So starting with the recap. So here you see we're down a little bit, S&P 500 down 0.2% last week. It was really tech weakness, or we'll call it Magnificent Seven weakness that you see here when you look at the sectors, consumer discretionary down, communication services down. And actually tech sector did okay because it was really about Alphabet and Amazon. That aside, certainly with the tariffs going on and then coming off in Canada and Mexico, you had some volatility around that. Chinese tariffs go on today. Markets certainly are nervous about where that could lead. So I would say those were probably the biggest reasons why we were down last week. Any observations last week, Jeff, in terms of how the market interpreted the economic headlines.

Jeff Roach (02:41):

Right? Well, there's definitely some interesting economic news in Europe. So a little bit dicey to read these charts for our regular watchers. You know, basically, you know, here we are, beginning of February. Look at those year to date numbers. That'll give you a little bit of a broader snapshot than just the last week. And you'll look at how Europe has shown some pretty decent strength. I think the key takeaway there is to consider, number one, they're coming off some lows because of some really serious headwinds last year relative to U.S. markets. But secondly, you want to remember there's some, a little bit of recovery showing up in Europe, particularly in the services sectors in Germany. So, we have that, if you're looking at the right side of your columns there, the Dax, the DAX index, which is the German version, more or less of the S&P 500 benchmark. Almost double digits for the year as services part of the economy improves.

Jeff Buchbinder (03:49):

Yeah, and you don't even have to deduct currency, right? Because the dollar's been pretty stable this year. So solid gains. International equities are actually helping out equity portfolios this year. Certainly something we haven't seen in quite some time. I should also mention and this will come up when we talk inflation later, that University of Michigan survey of inflation expectations was really hot, you know, up a point to over 4% in terms of consumer expectations. So that was a part of the weakness on Friday which led to the down week. Although we did have a pretty cooperative bond market. So you know, bond market didn't really move much. This sort of five day look is up in the Ag, the broad bond market index up 0.4%. So you know, now we're right around 4-4.90.

Jeff Buchbinder (04:44):

I'll show you a chart of the 10-year here in a little bit. But it looks like that 4.50 level that we've been watching from a technical perspective could be broken. We'll see. It's on the cusp. Also, a lot of gains in commodity markets last week, which is interesting. Oil's actually up again today, energy stocks on, as we're recording this Monday afternoon, energy stocks are doing quite well today. But look at gold. Gold's just been surging, up over 2,900. You have industrial metals up over 3% last week. So you know, tariffs are part of that because aluminum and steel tariffs are going on. Or at least the Trump administration announced that they are planning for those to go on. So that may be part of it, but I think maybe the market is also sniffing out a little bit better global growth, which Jeff, I guess you alluded to with the European comments. So thoughts on commodities or currencies?

Jeff Roach (05:46):

Yeah, the currencies. So bottom right box there look at the euro. So euro dollar close to parody, that's started to approach parity really in the last several months. Saw a little bit of weakness in the last week or so on the dollar given, as you suggested, Jeff, on some of the inflation fears. But generally speaking, dollar is holding up well and maybe now's your time to take a European vacation. What do you say, Jeff, is that in the works?

Jeff Buchbinder (06:20):

Not in the works, but certainly a lot of folks have been traveling overseas the last few months.

Jeff Roach (06:26):

So close to parity, you see that 1.03 just one level below that British pound, 1.23, almost 1.24 rounding up. That's certainly revealing the strength of the U.S. dollar at this time.

Jeff Buchbinder (06:42):

Yeah, we we're still pro U.S. in terms of asset allocation, but you have gotten two ingredients that you need for international outperformance. Number one, weakness in U.S. mega cap tech. And number two, a weak dollar. Now it's just seven, you know, whatever, 7-8 days <laugh> that we've seen the weak dollar. But we are seeing a little bit of a weak dollar here, so that'll be something to watch. So thanks for that, Jeff. Let's go to the bull and bear case, where we'll spend most of the time. This is a fascinating exercise to go through. And it really it reflects just how tricky this market is because there are really strong arguments on both sides. So we're not really picking a side. We've kind of taken elements of both sides in our outlook for 2025. And you know, I would say we're a little below consensus on earnings and stock price appreciation.

Jeff Buchbinder (07:40):

But at the same time, if we get weakness on some of these risks you know, we may be in a position to get more aggressive here. So, that's how I would frame it. It's obviously a little bit of art with the science. So we've got charts on most of these bull and bear case points. We'll start with the bull case. Double-digit earnings growth, robust economic growth, stable or slightly lower interest rates, tax cut extensions, which we're likely to get, and seasonal and technical factors. So starting with earnings, here is a chart of S&P 500 earnings growth for Q4. And when I ran this late last week, it was 15%. It's up closer to 16% now. So very strong course, that's 2024. If you turn to 2025, you continue to see at or near double-digit pace.

Jeff Buchbinder (08:39):

So there's a lot of earnings growth underpinning this market. It's helping stocks grow into the valuations. And, you know, the Mag Seven is certainly not slowing down its spending, and where's a lot of this earnings growth coming from? It's coming from the Mag Seven. So in fact of those let's call it 15.5% earnings gains, almost half, about seven points, are from the Mag Seven. And we haven't gotten results from NVIDIA yet. So that could end up being over half when all the numbers are in. So really strong support here for markets from earnings. Next, strong economic growth outlook slowing, but still pretty strong. Jeff, your thoughts here? This is pulled from our 2025 Outlook publication that we put out in December, which you can find on lpl.com.

Jeff Roach (09:35):

Yeah, yeah. So top right in the box there, 1.9, that's under 2025. That's real economic growth for the year. And we're basically saying, look, we're probably slowing down to trend. We've been above trend growth the last couple of years and down to trend. So when you hear someone talk about slowing economy <laugh>, it's where is the destination? And trend growth is certainly not a bad thing. Certainly driven by a decent job market. Consumers are getting paid pretty well historically, where you know, where we would see that that is naturally rolling into a pretty robust spending on the consumer side. And then of course, the business side continues to keep doing well with demand for capital expenditures. And that's certainly supporting the economy as well. So that is definitely in the bull side of the arguments here.

Jeff Buchbinder (10:38):

Yeah, artificial intelligence keeps coming up because it's such a strong driver of the economy and of earnings. So you could also turn that into a bear case argument as well. If you want to make the case that they're spending, these companies, are spending too much money and they're not going to get payback for all of that investment. That will be a debate that will probably continue throughout the entire year, maybe even in 2026. But for now, we're giving those companies the benefit of the doubt that they're going to get productivity increases and you know, the cash flows they need long term to justify those investments. So next the 10-year yield. So key element of the bull case is for yields to behave. And you can see here we're on the cusp of breaking down below that 4.5 level. If you break below, this is technical perspective.

Jeff Buchbinder (11:31):

If you break below 4.5, brings 4.25 into play. And if, which is our forecast for year end, and if the economy slows as Jeff, you and the team think it will, then that could lead to less inflation pressure. So we think we've got the makings of a stable or maybe a slightly lower 10-year yield this year. But as you'll see when we get to the bear case, there are certainly some challenges to that claim. So, key element, we need stable yields. And actually we talk about this in the commentary, again, the weekly commentary on lpl.com about how the Trump administration and Scott Bessent, the new treasury secretary, are targeting the 10-year yield. And they're going to try to actually, with the help of Jason Trennert from Strategas, someone who we know and follow closely, they're going to manage that 10-year yield, which means they have to manage the debt and the supply demand of Treasuries.

Jeff Buchbinder (12:39):

So we certainly have confidence that they can manage through it, but it's a challenge and it's absolutely a risk. So next we'll go to the tax cuts. This is of course, part of the bull case that these will get done. This is a sort of line by line estimate of what all these tax cuts will cost to extend. And you see it's almost 4 trillion. That is a huge number. And we don't think that the Republicans are going to be able to get enough offsets to pay for that entire price tag. So what we're likely to see, this is for a 10-year budget window, is a shorter budget window. Maybe it'll be five years to get through the whole Trump term or four. And if you extend the tax cuts for a shorter period of time, then they're cheaper. So you know, it'd only be half this roughly, right?

Jeff Buchbinder (13:35):

Remember, when you use reconciliation, you have to offset the tax cuts with spending cuts, that allows you to get through the Senate with 50 votes, which is certainly what the Republicans are going to have to do. So is it possible we get the full 4 trillion? Yes. By the way, this doesn't even include some of the things that President Trump has asked for. Like, no taxes on tips, no taxes on social security, no taxes on overtime. Those are probably not going to get through just because of the cost and the need to offset. Now, what they're doing at DOGE with Elon Musk is certainly helping. And what they're doing with tariffs is helping because they're raising revenue. But they still have a ways to go. So this is a bull case, but it's a tricky bull case we'll say, because it might disappoint the markets by the time we get later in the year, and we actually see what they can get done. Anything to add to that, Jeff?

Jeff Roach (14:29):

Yeah, well, I think part of the reason why, you know, you're trying to get to be able to pay, how do you pay for it, right, corresponding cuts in spending. You know, a lot of folks remember back, you know, 2001 and 2002, those years where when the economy could grow and maybe, you know, it slows to trend and, but it maybe reaccelerates a little bit into 2026, 2027, you know, a growing economy is the one that is the biggest factor in all this, right? So growing tax receipts from, you know, more people working and producing, and boy the numbers are a lot easier to balance <laugh> when the economy is growing well. Just a reminder in that regard.

Jeff Buchbinder (15:16):

No doubt. Yeah. So some of these, like business friendly regulation, things like that, that can maybe encourage more capital investment, things like that will help balance this out too. So we put in the bull case, but it's not a slam dunk. So, next we just call this like seasonal and technical factors. You've heard us talk about this before the January barometer or the January effect. When you're up in January, and we were up 2.7% on the S&P 500, the average gain for the full year is 17%, really compelling. And you're up almost 90% of the time. On the flip side, if you're down in January, on average, the S&P 500 is only, is down, actually down a little less than 2%. So very positive seasonal force here that suggests that we're likely to be up.

Jeff Buchbinder (16:12):

And then we have a, you know, a positive chart, right? This is the S&P 500, we're just rising through this channel. We're near all-time highs. In fact, less than 2% from all-time highs. Right now as we're recording, we're not really overbought anymore. We've digested this big run. You can see the RSI 14 at 51, which is a very kind of calm, average number, right in the middle of overbought and oversold. And breadth is not great, it's okay, maybe that's a bear argument here, but the chart looks good. Upward sloping, channel upward sloping, rising moving averages. We've got higher highs, higher lows, and hopefully we can break back above to new all-time highs here soon. So turning to the bear case now, moving quick, got a lot to go through <laugh>. So the bear case certainly has some good arguments here.

Jeff Buchbinder (17:05):

Tariffs and trade policy uncertainty. I bet nobody listening is surprised to see that one up here. Next, deficit spending, which certainly relates to the tax cut discussion we just had. Sticky inflation. So Jeff, I'll be relying on you to explain why we shouldn't be so worried about inflation. Number four, overly bullish sediment sentiment. This has actually become a weaker bear argument lately because sentiment has actually cooled off a bit. But then, that doesn't change the fact that stocks are richly valued. So that's the fifth point in in our bear case. So, and then obviously this is not an exhaustive list. In fact, we could probably come up with, you know, 20 points on each side pretty easily, but we think these are kind of big picture the best five. So let's start with trade policy uncertainty being high.

Jeff Buchbinder (17:58):

You've seen this chart from us, just an easy way to look at how the markets and the media are concerned about tariffs. You know, China tariffs going in now and those are likely to be ratcheted higher. So I think a lot of this trade policy you know, relates to that because we're not really, we're not going to demand too much, I don't think from Canada. And certainly Canada and Mexico have both made some concessions in giving the Trump administration what they want. So, and we'll get Europe, tit for tat on Europe. We'll probably get universal tariffs, but they're going to be modest, we think. But still, you know, they're negative because you know, it hurts company profit margins because they're paying more for imports. And then Jeff, you can talk to, you know, the inflationary impact and maybe the economic impact of you know, a tit for tat scenario.

Jeff Roach (18:56):

Yeah, well, there's just such an unknown commodity because you just, you don't know how aggressive our trading partners will respond in some retaliatory trade adjustment to say, hey, you're putting tariffs on us. We're going to go ahead and put something on your goods coming into our country. You know, one of the things that we've been writing about here at LPL Research is the fact that in addition to foreign firms bearing some of the brunt of a tariff, as well as domestic firms deciding perhaps temporarily eating up some of that hit from the extra tax of a tariff. Another thing that's the third factor that's perhaps underappreciated is the currency adjustments that can offset some of the factors of the tariff. But despite all those perhaps adjustment mechanisms in many cases, it does hit the consumer. And you know, we can't avoid that.

Jeff Roach (19:57):

And it is just the uncertainty that is the biggest concern, even though it might not be as bad as you might expect. Just the fear of the unknown could be a challenge for markets. You know, you think about, you know, when the pilot says, hey, buckle your seat belts, you know, don't walk around, we expect some turbulence when it turns out, you know, it's a lot less that you imagined in your head <laugh>. But nonetheless, that created a little bit of a few moments of discomfort as you're awaiting the chop, as it were. I think in some ways this is why it's fair to put tariffs in the bear case because you just don't know what kind of impact it might have on markets.

Jeff Buchbinder (20:43):

Yeah, good point. We've both been on the road quite a bit lately. I think it's fair to say we've both had that experience. <Laugh>, no doubt. I think that the currency piece is very important here because, you know, it makes our imports cheaper if the dollar is strong, which it has been, right? So and China's weakening their currency to try to absorb it. So we're going to get that little bit of a buffer. You mentioned the other buffers from the actual importer and the manufacturer overseas eating a little bit. So, it'll have an impact. It'll help us achieve some objectives that the Trump administration has, but it's not going to be the full hit, that's really important to say. So it's still a bear case, but, and it still presents risk if the retaliation goes you know, several rounds back and forth, which we saw in you know, 2018 and 2019, by the way tying this to earnings, we're on track to have the most companies mentioned tariffs of any quarter ever recorded.

Jeff Buchbinder (21:52):

So in fact, I think we're right around 150 companies have mentioned tariffs already, and we're barely over halfway done with earnings season. That's S&P 500 companies. So we're on track to shatter the record from 2018 2019, where a lot of companies mentioned tariffs, but not as many as this time. So it's a very popular topic, certainly as we expected it to be and will be certainly a big challenge for companies to manage just the overall uncertainty. And then once we know what the, you know, the tariff landscape looks like, do you move supply chains? Do you shift production? You know, things like that. So let's go to debt, now, this is certainly a bear case, no matter how you slice it. Again, we think that that the Treasury will be able to manage through this pretty well.

Jeff Buchbinder (22:44):

We think there's going to be enough global demand for Treasuries to prevent our yields from skyrocketing, but it's not going to be easy. And you know, look no further than this 6 trillion column. This is from our 2025 Outlook, by the way. The 6 trillion column, that is the amount of Treasuries that mature in 2025. So we're going to have to refinance those at higher rates. I believe we're spending 18% of tax revenues on interest costs, and that's only going higher as this interest as these bonds mature and the interest gets refinanced at higher rates. It's kind of like a mortgage <laugh>, right? If you've sold a house recently and got a new mortgage, there's a good chance that you experienced what the Treasury experienced, right? Lower rate going into a higher rate. So it just, if we don't get this under control, and certainly the Treasury wants to, and they've, Scott Bessent has talked about it, if we don't get this under control, the problem just gets tougher and tougher to manage. So a big focus this year managing through this. And you know, if you're wondering how it's going, just look at the 10-year <laugh>, right, Jeff? That's the report card.

Jeff Roach (24:02):

Yep. Yeah, you can't argue with that. But, you know, in some ways, maybe this is a positive way of looking at this bear case. I think markets are a lot more comforted knowing Scott Bessent can manage through some of these maturing Treasuries versus the challenging times that we had with Yellen financing debt with very, very short term instruments.

Jeff Buchbinder (24:30):

Yeah, Bessent's a markets guy. That's all he is ever been, pretty much, other than I guess an academic mixed in there, you know, teaching, I guess he taught classes at Yale from what I understand, but still, he's a money manager. He knows the markets and certainly is well qualified to try to manage the Treasury's balance sheet, if you will. So this will be important to watch. In fact, I would argue this might be well, other than a resurgence in inflation, this might be the biggest risk in 2025. Because like we talked about, the tariff risk we think is manageable and Trump can back off it if he sees that it's disrupting markets too much. This debt problem, you can't really back off. So speaking of inflation, certainly a big risk. This is the break even rates for the TIPS market. So right now, two year TIPS are pricing in inflation around three, 3% or so, which is lower than what we got from the University of Michigan survey, in which we we're going to try not to pay too much attention to because that said, consumers expect over 4% inflation. We wouldn't put too much weight on that. But what do you think here, Jeff? Is this are we going to level off at three? What gives you confidence that we're going to come back down off of three?

Jeff Roach (25:54):

Well, I think this does make sense to be in the bear category at least one of the factors, and that is this, you know, markets expected inflation to be a lot closer to the two and a half rate by, you know, going into 2025. Little bit surprised in the uptick in November, December, January. We're going to get that pretty soon. CPI numbers. Now, remember, it's important when we talk about this 2% target that the Fed has want to remember and markets know this, but you want to make sure our audience knows as well that we're talking about a longer run average of 2%. So Fed's comfortable with it hovering above, sometimes hovering below. And this is, you know, going to average out over time. But the fact that we're keeping at a 3% type of a rate, you know, 2.8 to 3%, that's adding a little more pressure to the Fed.

Jeff Roach (26:49):

The good news is it doesn't seem as if the economy is breaking, and hence they have the luxury of pausing, just waiting and seeing, looking at all their options, looking at the data and not feeling rushed into a rate cutting decision or a rate hiking decision for that matter. So, we do expect inflation to ease this year probably in the April data, maybe the March April data, we'll see. We'll start seeing that. But this is certainly frustrating for markets right now, seeing inflation still running pretty hot.

Jeff Buchbinder (27:28):

Yeah. Which is why the Fed's probably just going to hold steady for a while here. Mm-Hmm <affirmative>. Right? Still, our house view is still couple cuts, but it's going to be back end loaded. And I think it's fair to say you're more likely to get one than three at this stage, but we'll see. We'll see. This is a key risk. We don't want the market to start worrying about Fed rate hikes because that is enough to drive a market correction. We think we're due for a pullback. We'll see when it comes, but you know, hopefully it can be limited in one of these five to 7% kind of pullbacks that we've seen in recent years. Nothing bigger than that, but you know, we don't want to fight the Fed. So as long as the market expects Fed rate cuts, even if it's just maybe one this year or one and a half this year, that can present a pretty solid foundation for stock prices.

Jeff Buchbinder (28:26):

And as you saw in our 2025 Outlook, part of our market outlook, part of our assumption, is that we will get those Fed cuts and stocks tend to do pretty well after the Fed starts cutting. So absolutely important factor. So, let's go to sentiment here. So in the Outlook, we showed a survey by the conference board. They asked about 3,000 households, do you think stocks are going up or down in the next 12 months? And in the December survey, it was the highest percentage of bulls ever recorded in over 30 years. So, that raised some eyebrows. I mean, we already knew there was a lot of optimism out there, but that really put it on paper, right? And this chart here is a little bit different. This shows the relationship between the AAII survey of bulls and bears.

Jeff Buchbinder (29:20):

So it's the spread between the bulls and the bears. American Association of Individual Investors also has a very long history, but this is just a recent look. So that's the blue line, and you see that we've seen sentiment come down a little bit, cool off a little bit over the last few months based on this read. So that's good. You don't want sentiment to be too hot. But the other point here is just look how closely the three month change in the S&P 500 follows sentiment, right? It's almost like these survey recipients are just saying, you know, the stock market was up over the last three months, therefore I'm a bull. Stocks down over the last three months, therefore I'm a bear <laugh>, right? So sentiment and stock price movements are closely tied together, but I think this is instructive to think about.

Jeff Buchbinder (30:07):

So sentiment's cooled off, which is good, but we're going to still put it in the bear column because there are a lot of optimists out here and a lot of enthusiasm for stocks as we are near all-time highs. That ties into the valuation argument, we're pricing in a lot of good news. This is the equity risk premium. So it tells you if equity investors are getting compensated for equity risk relative to safe haven bonds, specifically the 10-year Treasury yield. And right now the earnings you're getting from buying stocks through the S&P 500 are not any better than the yield you're getting from Treasuries, right? You're not getting a premium of yield versus yield, earnings yield versus bond yield. If you're going to take the risk of stocks, you want to get paid for it, right? So this is saying stocks are really just too expensive to compensate you for the risk.

Jeff Buchbinder (31:03):

So this is another reason why we're a little bit more cautious than the consensus. We think we'll have a high single digit kind of return year, not a 20% year, like the last two. And we think maybe I mean, the market is really dependent on earnings growth to support these valuations, and there's a little risk to earnings. We're a little bit below consensus there, again, kind of high single-digit earnings growth, we think maybe 10. And then the consensus is looking for a few more points than that. So when you have high valuations, any bad news that comes tends to be punished more. So you don't know when it's going to come or what it's going to look like but when it does, you tend to get more volatility. So there's another element of the bear case, a very popular element of the bear case, that we think has some merit. So there you go. Five bullet points, five bear points. Pull them together, we think we'll have a sort of a choppy modestly higher year, but probably not another up 20. So Jeff, here's where I turn it over to you to preview the week, and then we'll wrap. So what should investors be watching this week?

Jeff Roach (32:13):

Well, we don't have, well, maybe I'm looking real quick. I don't think we added Chair Powell's testimony that he's going to give both to the Senate committee as well as the House Financial Services Committee. That's going to be great.

Jeff Buchbinder (32:27):

Last minute without telling you, I added that little line in italics there at the bottom.

Jeff Roach (32:31):

You did, fantastic.

Jeff Buchbinder (32:33):

I'm keeping you on your toes, Jeff.

Jeff Roach (32:36):

Nice. Well, this is the semi-annual report to Congress, and this is interesting. Of course, you know, it harkens back to the days when the press was interested in how thick the briefcase was for Alan Greenspan going to these testimonies as well as of course, going in and out of the FOMC meetings that a lot of speculation on that. But we learned a lot from these testimonies. Understanding how the Fed was changing in philosophy under Greenspan and then Bernanke. But still with the Powell led Fed, it's still interesting, still important, still helpful for markets to kind of get inside his brain on how they think about inflation since it is running hotter than they would like. So that's going to be on Tuesday and Wednesday, 10:00 AM Eastern. Outside of that testimony, we're going to have a whole slew of speakers.

Jeff Roach (33:31):

In fact, later in the week, we're going to have one of Fed officials talking about some crypto. That's going to be a topic of conversation. So that's going to be important. We'll be covering that in real time. In terms of economic data, you see the stars on the screen. NFIB, National Federation of Independent Businesses. That's important. Gives us a good handle on hiring and expansion plans and input costs at the small business level. Then of course, on the 12th is the CPI numbers. I hinted that, you know, we probably will have to wait and be patient until about April or so to really see this annual rate of inflation start to make meaningful steps downward. But we expect about a 2.9% growth rate on annual inflation with that latest read for January data. So, that's the CPI numbers.

Jeff Roach (34:24):

I think as we try to get a handle on the potential risks in the tariff discussion, a lot of it's unknown, but we should look first, I think, to the PPI, which is Producer Price Index. So that's basically saying, okay, what are the pricing pressures that are particularly unique to those that are importing goods? The firms at the producer level, hence the PPI, look at that. And then later in the week, we'll round out with a good look on January retail sales. We had a really hot holiday sales in Q4, especially November, December. So this shouldn't surprise us at all, seeing a little bit of a pullback in a recovery in January after we saw a very, very active consumer the end of last year. Import prices, a little bit early, this is for January data, it's a little bit early, of course no tariffs instituted yet as of this data. So probably not as exciting as import price releases, say in the next two or so months. So maybe this is the calm before the storm. I don't know if that maybe is the right phrase to use. That's probably not the most encouraging, but let's see how these things shake out once we have implementations of tariffs. But those are some of the things you want to look for, get ready for when we move ahead throughout this year.

Jeff Buchbinder (35:54):

Yeah, I was certainly thinking you know, import price, index star relating to tariffs. So glad you clarified that, that they're not actually in there, but that will be a good place to look for them going forward as well as the PPI as you explained. So yeah, the data for the next several months is going to be in the context of tariffs and we'll see. I know Jeff, you pointed out that in 2018 and 19 when the tariffs flowed through the last time, they didn't really get passed on to consumers. So we saw them in the PPI, but not really the CPI, right?

Jeff Roach (36:31):

That's exactly right. It all goes back to how committed and how strong the businesses feel they can be in passing along prices to the end consumer. But you're exactly right. We saw an uptick in Producer Price Index for wholesalers, retailers, but we did not see a material broad-based impact on consumer price inflation back in the day.

Jeff Buchbinder (36:55):

Yeah. In fact, consumer prices dropped you know, pretty meaningfully around that time after the tariffs went in, I know. So, and this is a different environment, obviously, there's much more inflationary pressure today than there was before the pandemic. So, it's not apples to apples, but still it's encouraging. And when you talk about all those different elements of the supply chain that can take some of the hit, currencies, wholesalers all of that, these should be manageable. And again, some of them aren't going to go in, right? Or if they go in, they'll just be part of a universal tariff that'll be pretty small. So clearly the market agrees with us that the tariffs aren't a huge risk but they're absolutely a risk nonetheless. So with that, let's go ahead and wrap. So we got them all in, 10 points. <Laugh>

Jeff Buchbinder (37:50):

Five, bull, five bear, and you know, kind of tried to pull that all together for you to share the LPL Research view for 2025, which is, again, pretty positive outlook. There's nothing wrong with a high single-digit kind of a year for stocks. There's nothing wrong with an economy growing at about 2% where we can get a little bit of better inflation numbers as the year goes on. But you certainly have some risks that we all want to keep in mind, in particular the trade uncertainty. So with that thank you Jeff for joining. Thanks to all of you for listening to another Market Signals, and we will be back with you next time. Take care.

Jeff Roach (38:30):

Bye-Bye.