Stocks Wrap Up A Historic Year… And Overseas Opportunities in 2025 12/31/24

0:00Live from the Nasdaq market site in the heart of New York City's Times Square. This is fast money on New Year's Eve. Here is what's on tap tonight. What a year. Despite a down December, it's been a year full of records from AI to crypto to broad tech and beyond. So will the markets roar higher in 2025 or is the long December a bad omen for the new year? Plus, polar vortex. December's going out like a lamb, but January is supposed to come in like a lion. We'll break down the impact this coming cold snap could have on travel, energy and more. And later, a look at next year's returns in retail, who's hot and who's not around the globe, and ticking off our trading regrets and resolutions for the new year.

0:42I'm Courtney Reagan in this evening for Melissa Lee, coming to you live from Studio B at the NASDAQ Market Site. On the desk tonight, tonight we have for you Steve Grasso, Guy Dami, and Bono and Eisen. Thank you all for being here. Of course, on this New Year's Eve, we are going to start with a historic year for markets, major indexes, all setting multiple record highs in 2024. The S &P doing it 57 times. That's more than one all-time high per week. The benchmark index rose 23 % this year after an already stellar 2023. It was the S &P's best two-year gain since 1998. The Nasdaq and Dow also posting big returns this year as mega cap tech led the way.

1:23The so-called magnificent seven responsible for 95. 95.95 % of the broad market's gains. These stocks have added nearly$5.7 trillion in market cap this year. But it wasn't just tech seeing gains in 2024. Consumer stocks and financials also outperforming. Meanwhile, on the downside, energy, real estate and health care. And then there was materials, the only sector down on the year. So as we close the books on 2024, and we turn our attention to what's to come, how should investors set themselves up for the new year. Guy, what are you marking in your playbook as we close the pages on this year, turn to the next?

2:03Thanks for coming, Courtney. I know it's a tough night to be at CNBC's Fast Money, but you are here. Thank you for that. And you mentioned all the records. I think the record that sort of sets all those things up is the fact that we saw$1 trillion of inflows into ETFs this year, which is a record. And that suggests, again, something we've talked about, this passive investing is everything. You mentioned that 95 % of the performance of those stocks. So the whole broadening out story really doesn't hold a lot of water, given what you just said. And the other thing that we should mention is not only do we have a record in terms of the stock market, but 10-year yield closed at the highest levels we've seen, I think now, in 18 or so years.

2:41And I think of all the stories in 2025, the move in interest rates, I think, are going to be on top of the list. I mean, the broadening out that we've all been waiting for, as Guy says, just hasn't happened. I mean, it is unbelievable, those stats that we ran. through with the Magnificent Seven. If you weren't in that trade, is it too late to get into it in the year ahead? Well, I think you want to wait for a pullback, right? So you nailed it at the top of the show. There's only been three other spots. You said it's the best performance back-to-back since the 90s. There's only been two other spots besides now and the 90s, the 30s and the 50s, where you had two years that were better than 20%.

3:17Are we going to have a better than 20 % year next year? Odds would favor no. odds would favor that we get a drawdown. Is the drawdown 5 % or 10 %? But it's got to be some sort of a drawdown. So maybe to Guy's point, if we're looking at interest rates, that could be the catalyst for a drawdown. But if you look at where Powell is, where President Trump is, where we think growth is, a lot's been pulled forward. Doesn't mean that a lot more can't happen. He's not even president yet. So I'm a firm believer in you could only pull so much forward. Yeah, I mean, obviously, we had a really strong year, and then we saw this major rally after we got the results of the election.

3:59But then a lot of that faded. I mean, we're talking about the end of the year, even sort of the last couple trading days. Not much to write home about, really, for the bulls, at least. Bonwin, what do you think that that portends for the year to come? Are we in a holding pattern until the new administration takes place, until maybe we know a little bit more about what we think the Fed could or couldn't do? It does seem like that last statement, a little hawkish, surprised at least some, at least by that market action. I'm hesitant to read too much into an entire and extrapolate an entire year's worth of performance based off of a week or two, to be quite honest with you.

4:34I know that we're all excited about 2025, New Year's resolutions. We're going to lose a few pounds. We're going to read that book. We're going to get out there. We're going to spend more time with the kids or meet that significant other. But the truth of the matter is that I think we should be a little bit hesitant to essentially assume that 2024 has to be so much different than 2025. Now, will fiscal stimulus continue the way that it has? Unlikely. So I think to Steve's point, I think that might be a headwind where you look to buy a pullback. But is the A-high undercurrents, do those still serve as tailwinds for the market?

5:09Very much so. Is there going to be continued capex bin? Very much so. Will it be pulled back? Will it be pulled back? be further delays when it comes to blackwell. I think all of these things you want to kind of keep a pulse on to understand if the currents have shifted. However, I would say you will likely cost yourself significant performance if you try to get out and end up going against the current before said current has actually shifted. It's interesting, Courtney. You know, the SMH and Bonwin talked about AI. If you look, that topped out in the middle of July of this year, around 283 or so, traded lower.

5:44It's been trading sideways ever since. And if you think about the importance of semiconductors to this market, they really have not been a performer now for the last five or six months, which I think is interesting. You know, we talk about NVIDIA, but below the surface, there are names that have not traded well. AMD has been a disaster. Qualcomm has been a disaster. Sort of tangentially, Micron's been a disaster. So for every sort of Marvell and Avago, there's an AMD and a Qualcomm and some other names that haven't performed. I think if you want to watch something closely in the early of the year, it's how semis perform going forward.

6:14And if you think about it, Guy talked about ETFs and passive investing on top of the show. Think about what's been the catalyst for a lot of these ETFs, crypto. So we've had Bitcoin ETFs. We have Ether ETFs. Maybe we're going to have more approvals for crypto. But that has been a huge chunk of this passive investing has been the crypto space that You could see in Guy and our in my lifetime. Right. We've had rare earth. We've had crypto. Right. We've had A.I. Now we're looking at quantum. So we have quantum computing. So is that way off in the off in the horizon? Possibly so. But there's a lot of these other things that could be the catalyst for a lot more push into different areas of semis.

6:59When you think about Intel, it's been terrible on AI. Will it be that terrible on quantum? I think that that's possibly where they could actually shine a little bit, where they can get a little bit more attention. So I'm looking forward to Intel being something better, which the bar is very low. The bar is pretty low. We're talking about what happened this year with Intel. Something better in 2025. But you do have a lot of catalysts after the market. The market needs, we've all been doing this way too long. The market needs to feel as if you're giving it a bargain. So you need a little bit of a pullback to have people jump in.

7:37Very interesting thoughts there. And we're going to get some more on the market's reaction. Let's go ahead and bring in Jim Bianco of Bianco Research. Jim, thank you so much for being here. You know, I think it's very interesting that we had you on just about a year ago. I think it was about January 3rd. So give or take a couple days. And at the time, we were asking you about what your take was for the 10-year Treasury. I think you said about 5.5%. And you think that's kind of where we're going to stick going forward still? Yeah. You remember that in October of 2023, the 10-year Treasury hit 5%.

8:05And I thought at the time a year ago that we would probably make a new high somewhere between 5 and 5.5. Now, we got to 4.75 back in April, and we got very close to it last week. I still think we'll probably sneak out a new high above 5%. And we're closing the year at 4.56. So that's not that bold a call anymore. It's only about 40 basis points away. So it doesn't have to redefine the world. But I do think that the trend in interest rates is still going to stay higher, at least for the first half of the year. And then, Howard, then is your assumption playing out with what the Fed will do? Because it hasn't been as correlated with the 10-year yield as you might have assumed, at least recently.

8:48That's right. You've seen that the 10-year yield has gone up almost 1 % while the Fed has been cutting rates. The last 60-odd years, that's only happened one other time, and that was 1981, when the Volcker Fed cut off of 20 % and the bond market didn't like it. So this has been quite a move to see that rates have been going up while the Fed's been cutting. Why? I think the market's rejecting the rate cuts and saying we don't need them. They're not necessary. And if you're going to continue to cut rates, you're just going to raise inflation expectations. And that's why, as the Fed continues to cut and talks about cutting in 25, the bond market just reacts to it badly.

9:28I think if the Fed wants to see yields down, maybe they should stop cutting. Yeah, I'm with you on that, Jim. And your work has been extraordinary here. And here we are, you know, somewhere between 4.5 % and 4.6%. I don't think a lot of people thought that was possible. But where does the market start to care? Because it's seemingly caring now over the last week or so. But where does it really sort of peek up its ears and say, hey, this is a problem? Oh, I think it's starting to care now, like you said. And I think, you know, if it gets to five or above five, it will really start to care. And why will the market care?

9:59It gets back to an earlier conversation you guys were having a few minutes ago. The valuations in the market are very high. That doesn't that's not a timing tool. The market continue to go higher, but it is an expectations tool. If you have a high valuation market, you should have lower expected returns into the future. And if you look at the work by Bob Shiller and JP Morgan and some others, the valuations of markets suggest that you should get about a 5 % or 6 % return over the next couple of years in the stock market. I know it's not the 20 % we're used to, but look at bond yields. They're at 5%.

10:29And if the bond market is going to offer you the same thing that the stock market could offer you with a lot less volatility, that's a problem for the stock market because it's just a more volatile way of getting the same thing for the bond market is going to offer. Jim, when you look at your thesis in all of our businesses collectively, we have to decide what could make it go wrong. So in your thesis, what are those ideas that might change the end goal for the 10-year for you? What could you get wrong or what could the market get right? Yeah. So, I mean, the big one that you can get wrong would be a recession.

11:06It would be a slowdown in the economy. Now, I know that people have said on and off for the next several years that the economy's slowing. We're going to go into recession. But the data is not showing that right now. But if somehow something happens, an event that scares the market and it turns the trajectory of the economy south, then it'll turn the trajectory of interest rates south. But right now, the reason that they're staying up and going higher is at the top line, the economy is not showing any signs of slowing down. It's part of the reason why every market has been every risk market, whether stocks, it's corporates, it's crypto has been rallying this year because there isn't a problem at the top line.

11:46Jim, thank you so much for joining us here tonight. Happy New Year to you. Happy New Year to you. Bonham, what do you make of some of Jim's comments? I guess particularly his expectation for the 10 year yield and his worries for the 2025 year to come. I think they're well founded. And as you mentioned, at this point, we're only talking about 40, 45 bits of movement. And we've seen incredible volatility this calendar year in terms of the 10-year. I also think it makes a very interesting point in terms of yields essentially rejecting what we're seeing on the front end of the curve. And we've had inversion, and we've had reversion, and we've kind of had a bit of an oscillation there.

12:28So in terms of under and the last thing, you know, earlier we mentioned the proliferation of passives and then how that feeds into optimism and capital flows. I think those are three points that he that he really highlighted. And then what we should be expecting in terms of forward returns. My pushback would be that if the VIX remains relatively capped, then it's tough to make the argument, at least from a perception standpoint, that you are going to have that increased volatility around returns. and then moving over to fixed income and eschewing equity returns essentially means that you will be missing out on the Broadcoms and the NVIDIAs and the Bitcoins and things of that nature.

13:11If you elect to lock in 5 percent and not, you know, the point being that volatility cuts both ways. Yes, you will dampen the downside, but you also will be foregoing the upside. And I think that is something where, you know, I might push back a little bit. All right. Fair enough. Well, meanwhile, we did mention Intel, but it's been a year to forget for that semi-stock. The chip giant sinking 60 percent in 2024. Its worst year since going public 53 years ago. Intel trading near its lowest level since 2010. It's also the year's second biggest loser in the S &P 500. Only Walgreens Boots Alliance performing worse.

13:44So is Intel stock a bargain going into 2025? We kind of got Steve's early read. So, Guy, I'm turning to you on this one. Well, I mean, if you played it on the bargain thing, which I've tried to do for a while now, it's been a loser's game because it's been a bargain for the last$15 to the downside. number one, just in terms of valuation. But if you look into play sort of something, it could be a homeland security play, so bad it's good. We've heard that story all the time. And it could come in the form of Intel. And again, you think about a company that's missed the entire move, not only in the stock market, but in semiconductors over the last five or six years.

14:16They've been putting out the pasture. But just something incrementally on the margins can get this from being a$20 stock to a$27 stock, and nothing has fundamentally changed with the business. So, yeah, I think it's one of those names that actually could surprise people early in 2025. You had a$20 billion investment, Intel. You do the sum of the parts. It's worth more than you're getting in the stock price right now. CEO had to go. That was very long in the tooth. It took way too long for him to leave. You're going to see the stock perform better going forward. Even if there's, even, you have to think about this as a stock trader.

14:57Even if you get the same performance, it's going to be viewed as in a better light because you're going to be closer to the end of the nonsense versus the beginning of it. So I think it does have the capability of trading higher in 2025. Bono and without Gelsinger, do you think that helps anything, remove any handcuffs on the stock? Well, yes, because that's, I mean, we essentially have a proven path. I mean, that that use case has been proven and it wasn't working. I mean, the whole argument now is essentially that, you know, they're really going to be investing in manufacturing. Clearly, they haven't been able to design and keep up with the with the likes of the top performance, the AMDs of the world that have taken market share.

15:34So now it's really a question of are is the foundry business going to get to a point where it can essentially compete with Taiwan Semi? I don't see them losing more market share. So the fact that you have new leadership and you at least know that the previous path is now going to be pivoted. Yes, I do think that's a catalyst, although I mean, I think this is tough. They've missed AI. They've missed GPU. They've missed Bitcoin mining. They've missed all of these secular tailwinds for chips, as Guy has said. And you just really wonder what that next catalyst is. This is one we're certainly going to be watching going forward.

16:10Well, coming up, retail's resolution or revolution altogether. The XRT underperforming the broader market in 2024. But can the group stage a comeback in the new year? A top retail analyst joins us next to lay out the names. He is seeing the biggest opportunity. And speaking of retail, you may want to grab a parka. Rigid temperatures inbound as a polar vortex heads for the U.S., where Americans could face the biggest impact and what it might mean for energy prices. That's ahead, too. And as we had the break, check out the celebrations and fireworks from around the world as we ring in the new year.

16:42Fast Money from Times Square, back in two. Welcome back to Fast Money. Retail stocks closing out the year 10 % higher, as measured by the XRT retail ETF, at least. But the group trailing the S &P 500 by more than 13 % over that same period of time. Value-oriented names were in vogue this year. Walmart, Burlington, Amazon, Ollie's Bargain Outlet, and Costco, among the biggest winners in 2024, each of double digits. Our next guest thinks the trend is set to continue in 2025. For more, let's bring in Cowan Senior Retail Analyst Oliver Chen. He's also adjunct professor of retail at Columbia. Oliver, it's great to see you.

17:20Appreciate the look tonight as well. Great stuff for New Year's Eve. So let's get started and talk about what you expect for 2025. Obviously, Walmart, major winner, up something like 72 % year-to-date. You think that can keep winning? Yeah, we're excited about Walmart in the year ahead because, Courtney, as you know, the story here is about ultra value and ultra convenience and being ultra fast. Walmart checks a lot of boxes in terms of what they're offering to the consumer with everyday low prices. In addition, there's a technology opportunity at Walmart, too, given that it's harnessed artificial intelligence in the loyalty program.

17:58Digital advertising is a big opportunity. I bought this jacket from Walmart's marketplace. So as we think about what happens going forward, it's this whole retail ecosystem. Another idea that we love is Costco as well. And our focus for next year is BJ's. If you like Costco, we think you'll love BJ's in part because the BJ's PE multiple is 21 times and Costco is 46 times. Bottom line, consumers are looking for value and the consumer is also somewhat bifurcated where the higher end doing a little better now in light of the S &P performance as well. So two questions or thoughts there. You talk about bifurcation, which I want to hit and I want to come back to, but you gave us the name BJ's Wholesale as well as Costco.

18:41And of course, Walmart has its Sam's Club business too. So how much of the value in Sam's Club is actually reflected in the price of Walmart stock? Or is it, I feel, as if we often don't talk about that, but that is a huge business on its own. Yeah, Sam's has 600 stores, and they've been a leader in technology and also pioneering their own private label. We've been impressed with Sam's. Obviously, Costco has been a huge winner, and we've liked that for many years. As you think about BJ's, it's only 250 stores. Costco and Sam's have about 600 plus. So we think there's room for all of these players, which is a wholesale business model focused on value, being off price.

19:20You really pay to shop here, and you pay to get access to these low prices. it's a very good market to be in as shoppers continue to have pressure at the middle and low end. So we're looking forward to the growth ahead at BJ's as well. And so I want to get back to that bifurcation thought. And you're talking about pressure on the middle and low end. But it feels like I've been covering retail for, I don't know, 13 years. It feels like we're always bifurcated. Are we not? It feels like everyone always picks TJX and Walmart as a winner. It seems like it's the same story. Yeah, Courtney, you and I go way back in the mall.

19:53And it's really this problem that we've seen for decades. You don't want to be stuck in the middle. You want to offer a really super premium product or you want to offer extreme value. Right now, you're kind of getting the best of both worlds. For example, I bought Caviar at Costco. Costco is getting a higher household income customer. Also, with the marketplace at Walmart, they're also getting a higher household income customer, too. So everybody likes value. But this bifurcation theme will continue. And part of that is retailers have to have these core competencies around what they do. And offering low prices will always be in style.

20:31Oliver, you're in style. You look great. Your namesake, Ollie's, has done extraordinarily well. I don't know if you cover that, but that's been on fire as well. But will this be the year where the dollar stores finally have priced all the bad news out, the tariffs, all their miscues? You look at a dollar gen, I think it basically closed within earshot of a 52-week low. Yeah, Guy, it'll be a very competitive environment, in part because Walmart offers such a low fee for delivery. And what's happening is consumers are staying at home and Walmart's competing quite hard with everyday low prices. And also they have a nice advantage with their suppliers.

21:07So I think it'll be a rocky road. I also think it will be winners and losers, and that will be increasingly apparent as well. What we'll look for on the horizon is hopefully lower interest rates. That will help the consumer. But as you know, we're all focused on what may happen with tariffs and the unintended consequences of inflation and potential price increases as well. So go with retailers with scale. And that was going to be my final question for you, Oliver, is how you're factoring in tariffs into your assumption for your recommendations going forward. How should we think about that when it's still an unknown?

21:41And obviously it could be a moving target as well. Yeah, it's been riskier for Target, Courtney. It's been a better situation, in our opinion, for Walmart and Costco, in part because they have big food businesses and they also offer lots of scale. So it's something we're watching. It will definitely impact earnings per share. Our sensitivity indicates about mid to high single digit increases in terms of hurting earnings per share by that much. Part of the magic is what increases will be priced through to consumers, that will be painful to the consumer because the consumer at the middle and low end is so price conscious.

22:17So not an easy solution. But retailers have had many supply chain problems for many years. So we're in a better place in terms of managing with this. And we've been dealing with tariffs for some seven years now. It's not necessarily a new concept for us. Oliver, thank you so much. Send me the link to that jacket. I love it. I want to see if they have but my size. Happy New Year. Bono, I want to turn to you and see if there's any names on your trading list that you might be interested in in the retail space. So I like Costco. Listen, I don't think it's cheap, but I like the recurring revenue subscription model.

22:53I think that should trade at a premium. I also, you know, I like Walmart. It's one that we own. And, you know, essentially being able to go to one place and get everything and have much more of an experiential type of situation, necessities and desires. And then I also like Ulta Beauty. I just like the fact that it's something that you're going to need to repurchase on an ongoing basis. So when I look at the life cycle of customer retention and return to store, I think that continues to propel forward. And we all care about how we look and how we present to others, especially after we've been released from the whole COVID lockup.

23:30So I think that just is the lifeblood of what it is to be here. And every preteen in my life is obsessed with skin care right now. I could not believe the request for Christmas from the preteens. They have beautiful skin. Why do they need also skin care? I classify Guy as a preteen, too. So he's doing it again. Facial scrub. It's cyclical. Jade rollers, you know. You know, you talk about Walmart and talk about BJ wholesalers and Costco. Well, Costco's up 39 % a year to date. BJ up 34 % a year to date. Costco up 79%. So you could see where the Sam's Club value is in there. That's going to be a perennial winner, Walmart.

24:07Dollar stores, probably the margins are still at risk with inflation going forward. The high end, though, Ralph Lauren and Tapestry. Tapestry, probably a one-off because the— Up something like 39 % year-to-date. Right, and the Capri deal, Tapestry's up double that because the Capri deal didn't go through. Right, fell apart and went out well for them. doubled its year-to-date returns. Right. I would say RL is probably a more stable earner than Tapestry right now, but keep an eye on Capri. I know it's been a terrible year since the deal. Yeah, absolutely. Or lack of the deal. Exactly. Well, there is a lot more fast to come.