2025 investment opportunities amid the 'Santa sell-off'

Summary

In this interview, Cali Cox, Chief Market Strategist at Holtz Wealth Management, discusses the state of the market as 2025 begins. Despite a recent selloff, Cox remains bullish, highlighting pockets of value outside tech, especially in rate-sensitive sectors. He underscores the importance of buying low and selling high, noting that productivity gains since 2020 could benefit companies in the long run. While concerns about AI and job cuts persist, Cox advises investors to balance their portfolios and consider rotating into underperforming sectors for better opportunities in the new year.

Takeaways

• 😀 The market began 2025 with a 'Santa Selloff,' marking the longest losing streak since April 2024.
• 😀 Despite recent losses, the bull market remains strong, with significant opportunities for growth outside the tech sector.
• 😀 The US economy is performing well, with Corporate America and consumers in a strong position for the year ahead.
• 😀 Investors should look for value in sectors beyond tech, particularly in rate-sensitive areas, as tech valuations remain high.
• 😀 The classic investment advice of 'Buy Low, Sell High' remains relevant, especially as stock prices decline.
• 😀 Wall Street is forecasting 15% earnings growth for the S&P 500 in 2025, the best growth since 2018.
• 😀 Earnings growth is expected to be driven by increased sales, cost management, and productivity gains.
• 😀 Productivity gains since 2020, driven by technological innovation, could boost corporate profitability without necessarily leading to job losses.
• 😀 There is no strong evidence yet that AI will significantly reduce job availability, but it could improve productivity and help companies grow.
• 😀 Although the Santa Claus rally didn't materialize, investors should focus on portfolio balance and consider rotating out of overheated sectors like tech.
• 😀 Investors are encouraged to diversify their portfolios, considering unloved sectors that may present opportunities as the market stabilizes.

Q & A

What is the current state of the stock market as the year begins?

At the start of 2025, the stock market is experiencing a downturn, with stocks falling for the last five days of 2024 and the first two days of 2025. This marks the longest losing streak since April 2024.

Despite the recent downturn, what is the outlook for the bull market?

Despite the selloff, the bull market is still considered to be alive and well. Experts believe it could be a good time to buy, as waiting may result in missing potential gains.

How do current stock valuations, especially for tech stocks, affect investment decisions?

The market appears expensive, especially tech stocks like the MAG 7, but there are still pockets of value to be found, particularly outside of tech. Investors are advised to seek balance in their portfolios.

What are some sectors that are considered to have potential for growth in 2025?

Despite the dominance of tech, there are still promising sectors, particularly those that are rate-sensitive. Analysts expect growth across all 11 sectors in the S&P 500, with continued sales growth and cost management.

What is the expected earnings growth for the S&P 500 in 2025, and what would drive that growth?

The S&P 500 is expected to see a 15% earnings growth in 2025, which would be the best year since 2018. This growth is expected to be driven by increased sales, effective cost management, and productivity gains.

How is productivity expected to affect the economy and stock market in the near future?

Productivity improvements are generally good for the economy and stock market as they drive technological innovation, higher wages for workers, and lower production costs for companies. However, there is concern about how much cost-cutting, such as job reductions, could hurt the broader economy.

What role does AI play in boosting productivity, and what are the concerns about it?

AI is seen as a tool that could boost productivity by allowing companies to produce more efficiently. However, there is limited evidence yet to show that AI will lead to significant job losses, though it remains a topic of concern for the workforce.

What does the absence of a typical 'Santa Claus rally' mean for market outlook?

The absence of the Santa Claus rally raises questions about the direction of the market, but it is not necessarily a sign of doom. It emphasizes the importance of balance in investment portfolios and considering sectors that haven't benefited as much from the bull market.

How can investors manage the risks associated with a market downturn?

Investors are advised to consider balancing their portfolios by taking profits from overperforming sectors, like tech, and reallocating funds into less popular or 'unloved' sectors that may present better opportunities as the market adjusts.

What are some key risks to watch in the market as the year progresses?

Key risks include high inflation, interest rates, and policy uncertainty. These factors could limit growth in certain sectors and affect overall market performance. Investors should keep an eye on economic indicators and how policymakers respond to these challenges.