2025 Market Predictions: Tariff Impact, Crypto, Mega-Mergers and More

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0:27Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, what does 2025 hold for the stock market? We broke it down with investing expert, Ann Barry. It's Tuesday, December 31st. Let's ride.

0:45Holy cow, it's the last day of the year. What a ride it has been. Toby, favorite memory from 2024? Wow, favorite memory from 2024. It's gotta be that three wood I hit on 18, 265 uphill carry. No, I'm just kidding. Probably it is related to the podcast. Seeing Spotify wrapped come out recently, that was a highlight. Doing the in-person trivia night we hosted in New York, that was a highlight. Too many to choose from, so I'm just gonna say my favorite memory is doing the podcast every day with you. To wrap up the year, we are continuing our special holiday episodes with a show all about markets.

1:19The stock market had a bangin' year in 2024, but what should you be looking out for in 2025? To help, we had a chat with the incredible Ann Barry, the host of the Brew's markets-focused podcast after earnings. Anne's LinkedIn is like reading what your parents thought your employment history would end up looking like. She's been a CEO, founder, broadcaster on TV channels like Bloomberg, invested billions of dollars as a private equity dealmaker, and we're grateful to have her on the show, which we taped in mid-December. Okay, Anne, thanks so much for joining us. I'm ready to dig in, guys. This is going to be exciting 2025.

1:55And we're about to dig in right now. Now, one of the biggest themes for markets in 2025 is going to be the policies of the incoming administration, particularly Trump's signature policy proposal to enact sweeping tariffs. Just to recap for everyone, Trump has pledged on day one that he'll impose 25 percent tariffs on Mexico and Canada, the U.S.'s two largest trading partners, and an additional 10 percent tariffs on China. On the campaign trial, he also mentioned slapping across-the-board tariffs on 10 % on all goods coming into the U.S., but we haven't really heard any more details on that. And tariffs of this scale would provide a major shock to the economy, upending global supply chains, and likely raising consumer prices for Americans.

2:37How should we think about the stock market's response to Trump's ultra-aggressive trade posturing? I think we've already seen the stock market response, right? Because remember, originally when he came out, he said, I'm going to slap 60 to 100 % tariffs across the board on China. And guess what the market did? Well, we've just been going through all time high after all time high after all time high. So I think people just really anticipate that at this moment in time and probably early in the new administration, this is Trump posturing. He's throwing the maximum possible punitive policy out there.

3:06And then he's doing things like he's been doing in Mexico. He's gone over there and said, OK, what are you going to do for me on immigration, guys? I bet he's going to go to Europe and say, what are you going to do on NATO spending, guys? And hey, China, what are you going to do on cybersecurity and privacy? So I think this is negotiation. We need to see what really shakes out. So you're saying investors are expecting the tariffs to not materialize? I think they were expecting some tariffs to materialize. I just don't think they expect to see it at the scale that's being thrown out there right now.

3:30And actually, I went back. I nerded out on this because I just love to nerd out on this stuff. I went back to see what happened under the last tariff program. Came to around$200 to$400 impact per U.S. household per year, which is not nothing. that's meaningful, but it wasn't as catastrophic as people thought. So people are saying we'll be okay. Let's dive into some of the sectors, though, that could be most affected. Sectors of the economy, like the auto market, a lot of auto imports come from Mexico and China. Same thing with fruits and vegetables. A lot of imports come from Mexico. Meat and dairy coming in from Canada as well.

4:02I guess my follow-up, though, is are there any specific investment opportunities that actually might arise as a result of these policy changes rather than just sectors that could be impacted by the tariffs? Well, when it comes to fruit and dairy and food, I think that's a little bit tougher. I think it's hard to see opportunity there. And I think you just say, OK, we need to see how this shakes out. This could be tough. To go back to the policy thing, that's really interesting, though, that the agricultural community actually supported the tariffs. Remember, at the beginning, last go around. So, you know, even despite the economic pain, it's unclear what the reaction is going to be when it comes to auto.

4:34But also, Toby, let's talk about electronics more broadly. We've actually seen these public company CEOs come out and already say we're doing two things. We are starting to accelerate our imports from these nations before Trump comes into office. And we are looking at nearshoring, but we've done it before and we did it last time. So we're better prepared this time. So I think we're okay. But during the last, if these tariffs were to materialize, I mean, it could have an impact on the market. I mean, I just went back to the last Trump administration as well. And on the days that tariffs were announced, I remember this very clearly because I was writing the Morning Brew newsletter at the time.

5:12The markets would absolutely tank. They fell 11.5 % on days when the tariffs were announced during his first term. So if you're saying now that the markets are pricing in the tariffs materializing, then we could be in for some shocks. We could be in for some shocks, but I don't think they're going to be the scale that we had. So let's go back to that moment when you were seeing the reaction for the newsletter, Neil. A lot of the companies that were impacted, well, what did they go and do? Right. They move their supply chains to Vietnam. They move some of their supply chains back over. They onshore it again.

5:43They brought it back to the U.S. So definitely let's go about Best Buy, for example. Best Buy, which had its own issues, a CEO sending their earnings call. Look, electronics prices will definitely go up. 60 percent of Best Buy products in terms of cost of goods sold come from China. By the way, 25 percent of U.S. electronics imports from China, 17 and a half percent from Mexico. So, yes, if it materializes, it's going to have an impact. But I don't think it's going to be the 11 percent drop that you just mentioned. Let's just broaden the scope here a little bit and talk about BRICS nations, which are those nations that include Brazil and Russia.

6:12They've expressed some interest in actually potentially moving away from the U.S. dollar, which caused Trump to float this idea of levying tariffs against those nations as well. Do you see these tariff wars having some downstream effects, like potentially this pushback against the U.S. dollars, like hedge money over the global financial system? Like, are you thinking of that widespread about the potential impacts from Trump's, like, you know, tariff war? OK, so let's see what Trump said in response. I've got this little printout here because I saw this, too. When the BRICS nations came out and said, you know, perhaps we'll start looking at a different anchor currency other than the dollar, which is a sort of derivative effect, Toby, of what you're saying.

6:50Trump basically came out and said any country that does this should wave goodbye to America. Right. So I think it's pretty clear that even if we do go down the tariff route, I don't think we're going to try and reach a point where we have this very, very weak dollar as a result. And look at who Trump wants to appoint, right, as Treasury Secretary and as Commerce Secretary. You know, these are folks, they're Wall Street guys. They don't want to see mass tariffs coming and they want to see negotiation, I think. Yeah. And then finally, just looking specifically at the markets again, are there some companies that you think have navigated this period before the Trump administration particularly well?

7:26One company that comes to mind is Walmart. They say two thirds of their items are made in the US versus maybe a company like Target that is a little bit more exposed to importing goods from Mexico and China, et cetera. Is there any names that you're kind of looking at to say, okay, they have their ducks in a row here. They think they're gonna weather the storm pretty well. I think all of them have lived through this before. I'm not trying to dodge the question. is one versus another. It's just, they literally have lived through this before. And let's look what happened, right? They lived through the last Trump administration, the tariffs came in.

7:58People either adjusted their supply chains or they adjusted their prices, right? That's number one. Number two, it's not like the Biden administration came in and then abolished all those tariffs. Do you remember there was tacit agreement across the aisle? There were crickets. There was a little bit of, you know, a reaction when the tariffs came in, but once they were in and they were in effect, there were crickets. You know, there was tacit agreement that, yeah, we need to get tough on China, we need to get tough, this is what we need to do. They weren't reversed, which means we've been living with it.

8:25So the question is, what does the incremental amount do? And I just think the incremental amount just means that we just incrementally get more from the places that we moved our supply chains to. Let's move on to our next category. So every year, there's this bank called Saxo Bank that releases this annual list it calls outrageous predictions, where it picks a few events that, while unlikely, could potentially happen. One of those predictions is that NVIDIA will balloon to twice the value of Apple in 2025. Some of the rationale behind that prediction, NVIDIA has this next-gen Blackwell chip in the pipeline that represents this 25-fold increase in performance compared to its existing lineup.

9:01There also seems to be no signs that the AR arms race going on in big tech is slowing down. Companies like Meta, Google, Open Air are all vying against each other for these all-important NVIDIA chips. Those tailwinds have turned NVIDIA into this bell of the stock market ball. It's up over 180 % in 2024. But, Anne, I'm curious to get your thoughts. Is NVIDIA going to continue to capture more of this AI market? Or are some of the headwinds, maybe regulatory scrutiny, going to slow it down as we enter 2025? First of all, how excited are you guys for the watch parties, the NVIDIA earnings watch parties coming out next year?

9:36I just wish we had the idea. Yeah, I know. So NVIDIA earnings have become this blockbuster event on par with Fed interest rate decisions and jobs reports. kind of out of nowhere that people were hosting literal watch parties at New York City bars for its third quarter earnings reports. I do wonder whether those, well, maybe we've reached peak NVIDIA earnings as sort of those year-on-year comps get a little more reasonable and you don't see things like this$3 trillion company is growing at 300 % anymore. But it was a really fun time this year. Well, we've got to host some. I feel like I see a host party or live streams in our future.

10:12So let's look at what happened with respect to Blackwell and NVIDIA this year, right? The promise of Blackwell, you just said it, Toby, like unbelievable capacity, the speed of processing and also it's like more energy efficient, which is good news for everybody. And so the promise of it has been out there. And finally, 2025 is when it ships, right? The volume comes out, it gets real. So my thinking is the following. NVIDIA has blown past expectations in most of the earnings releases, with the exception of the last one when it hit expectations and there was this muted response, which is absurd, right, because the outlook was fantastic and they were like punished for just being really good students.

10:48Well, I think what's going to happen in 2025 is there's going to be this reversion to the sort of forward-looking statements of NVIDIA, because Blackwell actually ships. Don't forget, NVIDIA does not manufacture its chips, right, which means whatever happens in 2025 is related to two things. One, making sure that their manufacturing partners are getting the stuff out on time and to their clients on time. And there have been delays. As long as that happens on time, I think NVIDIA continues to be stable. So what causes NVIDIA to pop? Well, they need another generation of a chip. Or they need to say, we're going to accelerate our production.

11:20And this is how we're going to do it, because we're going to change our manufacturing. I don't know how they're going to do that, to be perfectly honest. So I don't know that we're going to see the same explosion in NVIDIA, where I do see a concern. And by the way, I don't think they're going to be twice the value of Apple for what it's worth. I do think that we're going to start seeing in 2025 all of this talk about competitive chips either materializing or not. And if it's not, I think NVIDIA jumps up again because then it will become clear it's the only game in town for even longer. How do you think about NVIDIA in relation to the broader stock market?

11:53I mean, for the first half of the year, AI dominated and most of the S &P 500 gains came from NVIDIA and just a couple of the other magnificent seven. Towards the second half of the year, the stock market seems to have broadened out and things like utilities and other sectors are growing faster than the tech sector. Do you see that as a good thing and maybe a way for this market not to be in a bubble like the dot-com version of it two decades ago? Yeah, well, that's a great question. So, let's go about utilities and sectors like utilities. So, utilities historically have yielded dividends, right?

12:25So, when you've been in an environment where you had really high interest rates and it's almost as effective for you to go take your cash, put it in a high yield savings account, keep it in the bank. Money has tended to go there. With interest rates coming down, I do think, Neil, that the dividend yielding stocks are going to become slightly more favourable, things like utilities being one of them. Also, people are saying, oh, great energy deregulation because we've got Trump coming in. That's probably going to be good for utilities too. I think broadening out is going to really depend on a couple of things.

12:52I'm not sure it's going to be broadening out necessarily by sector, but I do think it's going to be broadening out by winners and losers within sectors. For example, all these folks have been talking about investing in AI and the promise that it's going to bring greater productivity. I think everyone in 2025 is going to be like, great, now show us the money. Where is it? Where are the results? And if you don't have them, I think you start to see those share prices start to go down. But if you're actually delivering in the way that Salesforce is to pick a name out of the blue, I think that continues to pop.

13:19That was a perfect segue into my next question. Actually, you recently interviewed Salesforce CEO Mark Benioff, and you got his take on AI. And you really straight up asked him, do you think the AI market is currently in a bubble right now? Take us through what he had to say as the CEO of Salesforce, as a CEO of a company that is betting a lot on AI. But what was fascinating is he broke it down into two different buckets. So he said, let's start with the private market. And so lurking inside Salesforce, by the way, also lurking inside NVIDIA, are these big venture capital firms because these big corporations are investing into startups where they have real visibility into how those startups could function.

13:56And Mark said, look, Salesforce has got about$5 billion under management right now inside startups. And we're seeing some really great activity in the AI space. People are really breaking the mold. There's real innovation. He also called out companies like Inflection said, there was no there there. And when there's no there there, you know, the emperor is going to have no clothes and the market's going to start calling it out. So I think he said there has been a bubble in certain applications of an AI. He said he didn't name names in the public market. He did said that there are some now where the fundamentals are not proving out in the public companies.

14:26I happen to agree with him. But I don't know that it's until maybe the middle of 2025 when we start really seeing who's been bluffing, not with malintent, with hope as a strategy. And hope is not a strategy. And I think we start seeing that come to fruition next year. Do you, just to put you on the spot, are there any particular names that you think are bluffing or have maybe been talking a big AI game and will not be able to prove it out next year? Oh, I've been so wrong on this. I'll give you where I've been really wrong. So I thought for the longest time, and Alex Karp, if you're listening to this, please come on to the show and talk to me about it.

14:59For the longest time, I thought Palantir AI, I know it's a consulting business and it talks about AI, but it's not a software company. Why does it trade where it's done? It's that share price, guys, this year, you've seen it, right? Top five performer in the S &P 500. Top five performer. I'm still not 100 % clear on the exact repeatable use of AI. So I'd like to see more evidence there, but that's what I got it completely wrong. Like I thought that was hopes of strategy and Alex Cobb, again, if you're listening, come, has proven me sort of wrong. I do think that there are other companies where they've talked vaguely about AI as something that is going to be really important to them, but we haven't yet seen it being adopted at scale.

15:45So let's take, for example, in the manufacturing side, I've been this really big believer that whether it's medical devices or it's in farming equipment, we're going to see what's been going on with consumer electronics, where the next generation of combine harvesters, the next generation of scanning machines in hospitals are going to have more AI capabilities. I think that's coming. I think it has to come. I'm just not sure what the timing is going to be. And it's totally okay. Last year, there was something called the inverse toby index where everything i predicted that was going to happen the next year the reverse ended up happening so wow i'm right there with you oh we need to get you your own etf i know the inverse toby the inverse jim kramer people make a lot of money or lose a lot so another hotter than hot sector this past year has been crypto the price of bitcoin finally broke through that vaunted a hundred thousand dollar barrier which also propelled it to become the best performing asset of the last decade.

16:38Meme coins are still all the rage right now with Dogecoin carrying a higher market cap than Target. Can't believe that's a real sentence. Part of the reason behind all this frothiness and the record highs is this perception that the incoming Trump administration, particularly his pick for the chair of the SEC, Paul Atkins, are much more crypto friendly than past administrations. Do you see crypto carrying all this momentum into 2025 and beyond, or is it going to get maybe a rude awakening? OK, since we're in confessional territory, I feel I have a confession. It's a safe space. It's a safe private space.

17:10No one's listening. I have never bought crypto. OK, for lots of reasons, I'm happy to go into another time, but I've never bought crypto. And I've looked at the adoption as, OK, it's getting more mainstream. It's getting more mainstream. It's getting more mainstream. I do think 2025 is the year when people like me have to get over themselves and say, it's not going anywhere. figure out how you're going to ride the wave. The wave doesn't necessarily need to have the same momentum that we've seen over the last couple of weeks. You're right. I think it feels like there's a sea change. Like Gary Gensler, who's the current head of the SEC, has been vehemently anti-crypto.

17:46That's going to change probably with Paul Atkins coming into the seat. We've got David Sachs being appointed as a sort of unofficial AI and crypto czar, right? You've got Elon, don't get me started on meme coins, but he clearly is a very influential, powerful voice in the next administration, he's all for it. So I do think now looking for legitimate ways to get around the infrastructure of this. And I was actually, I was book launch party of a friend of mine, Anthony Scaramucci, who's been a Bitcoin evangelist for a long time. And Michael Saylor was there talking about, there's this mic drop moment where he said I invested 25 million bucks in Bitcoin or whatever it was.

18:18And now it's like billions of dollars worth of value. So I think looking at companies like MicroStrategy, looking at companies like Coinbase, non-investment advice, But I think finding legitimate players around the infrastructure, I think we're going to have to do it. I'm going to have to do it. I don't want to. If I was thinking about investing in crypto, you know, why would I? Is it just because I think the price is going to go up? Because you say there's more mainstream adoption. There's been ETFs from like the most institutional of institutional investors like BlackRock. We still haven't found any real proper use case for Bitcoin.

18:54Maybe some other crypto does have some applications. But for Bitcoin itself, it just seems like it is a store of value, very similar to gold, where people will just buy into it because they think that other people will buy into it in perpetuity. That seems to be the case, right? I did go back to my point on nerding. I did go and read the Satoshi White Paper. I did. And that's exactly it. It's a store of value. There's a finite amount. Some people would argue more finite in terms of discoverability than gold. and if you have something that rare and finite and known amount, then that's what they're using it for.

19:26I think it's just worth reminding people that there was a crypto winter two years ago where the price of Bitcoin plunged 75%. The head of a crypto exchange stole$10 billion and is now serving a 25-year sentence. So we'll see what happens in the next few years with Bitcoin. And don't go anywhere. We'll be right back after this break.

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20:29They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Made the best idea away! On brand with Jimmy Fallon. Series premiere Tuesday on NBC.

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21:35Sure seems like Jay Powell has nailed the mythical soft landing. Inflation has returned to just about normal levels while the job market has remained healthy. Meanwhile, there appears to be some stability at the top after Trump said he wouldn't try to remove Powell, with whom he's had some beef before. And what can we expect from the Fed this year? I think we see gentle cuts, but I think we see Jay Powell. I'm a big fan of Jay Powell, by the way. I do think he stuck the landing under really difficult circumstances. I think we see him trying in the next three to six months to very carefully and cautiously feel out what fiscal policy is going to look like.