Stocks: You gotta have ’em. Ask John Stoltzfus, he’ll tell you.
And if you’re gonna buy some stocks, they should be US shares. Just ask… well, anyone buying stocks. Because US shares are all they’re buying these days.
Notwithstanding tariff trepidation and the usual concerns around Donald Trump’s “unorthodox” (to employ a euphemism) style, most investors have high hopes for US equities what with tax cuts and de-regulation in the pipeline.
If you’re wondering what the best case might be, SocGen’s Manish Kabra says SPX 8000 by the time America celebrates 250 years of independence. “A blue-sky scenario of getting everything right on the Trump agenda could lead to the S&P 500 reaching 8,000 by July 4, 2026,” he wrote, in a year-ahead outlook which landed in inboxes Monday.
As the figures below, from Kabra, show, the US is increasingly the only game in town, accounting for well more than half of global profits, the largest share in a quarter century, and before that, since the late 80s. The chart on the right suggests US stocks may comprise nearly two-thirds of total EPS growth next year.
“There are concerns,” Kabra went on, that the US equity market’s now too big as a share of global market cap. As the figure on the left, above, shows, US stocks eclipsed the dot-com-era peak in that regard during the post-pandemic rally.
The market-cap dominance dynamic became considerably more acute during the Nvidia revolution and, most recently, the post-election melt-up.
You could argue that the profit outlook justifies the scope of US market cap dominion, but that brings us back to a nagging question about long-term growth expectations for the market leadership — namely, are those expectations realistic?
“We are not in the ‘hard landing’ camp for Tech profits, but the top 10 stocks are c.35% of the S&P 500, while their profits are c.25% of the S&P 500 [so] avoiding concentration risk is a paramount consideration,” SocGen said, suggesting, as many other strategy teams have in recent weeks, that investors consider the equal-weighted S&P.
One way or another, though, “American exceptionalism stays in the game,” the bank said, adding that robust profit growth for corporate America “should keep excessive valuation in check.” (I guess that depends on your definition of “excessive.” Some would argue valuations are already exorbitant.)
Kabra conceded that US shares could struggle in 2025 if there’s “a global downturn” or “an ugly trade war,” but other than that, “the only reason to be bearish is that there is no reason to be bearish.”
Just monkeys throwing darts.
Trump should hope Powell disappoints markets and pauses rate decrease.
Seven weeks until the show starts and many “analysts” see no significant risks in 2025.
So much anticipated good news has been pulled forward and discounted in current pricing already.
Yet, there has not been much thought given to what kind of tax cuts may be passed and when they might actually take effect. (2026 best case?) Outside of perhaps allowing more M&A among the small and mid-sized banks, I have not seen much focus on just which oenerous regulations will be lifted on what sectors. The other industery group where regs look likely to be lifted are in the petro sector. Shares of drillers have not been performing all that well despite that. So where is all the projected earnings growth set to come from?
Fundamental analysts are trying to spin stories, but one only need read McElligot and his cohort to get a better read on things.
I know some folks see me as a nitpicker from time to time but our 250th anniversary as a country does not fall in 2026. That is the 250th anniversary of the signing of the Declaration of Independence. In that year, we had not yet won the war over the English, we had no Constitution and we hadn’t actually figured out what the thirteen states actually were. We officially became the United States of America when the Constitution was signed on Sept 17, 1787 and finally adopted in 1789 because the final document had to be approved by the prescribed number of states which didn’t happen until 1789, although there was an interim document called the Articles of Confederation, which was superseded by the current Constitution in 1789. In the interim there was the same kind of political mess we have inherited today. And some would say we really weren’t the real deal until we beat the British in the replay in the War of 1812. Then we were finally the “goods” (oh, except for that crazy pause for the Civil War thingy).
Well then get ready to get sick of hearing the word “Bisesquicentennial” bandied about 13 years too early.
You have a monkey at the controls of the national steam shovel and there is no reason to be bearish?
+1
From a “fundamental” view, market thinking discounts possible +ves (dereg, lower taxes, etc) and possible -ves (tariffs, trade war, shrinking labor force, etc) and uncertainty (DOGE, etc) which is itself a -ve.
From a “flows” view, market is simply being pulled up by retail and corporate buying and seasonality, regardless of any “thinking” going on.
My “thinking” is that tariffs, trade, labor, and uncertainty -ves hit in January, long before any of the +ves can show up.
Sorry! I meant to write “From a “fundamental” view, market thinking discounts possible +ves (dereg, lower taxes, etc) and does NOT discount possible -ves (tariffs, trade war, shrinking labor force, etc) and uncertainty (DOGE, etc) which is itself a -ve.”
Stephen Miller outined Trump’s market-friendly priorities:
“Miller claimed Sunday that Trump’s actions on his first day will immediately stem the flow of people seeking to enter the U.S. without authorization. Other key campaign promises, including broad tax reform, will come later, Miller said, once Trump builds momentum along the border.
“Now, President Trump, regardless on day one, is going to issue a series of executive orders that seal the border shut and begin the largest deportation operation in American history,” the aide said. “It’s something the Republicans have been talking about for decades. But with Donald Trump, this is something that is going to happen.”
Streets around here are clogged with delivery e-bikes, Amazon trucks and third-party delivery vans that supply my town with takeout, bagels, groceries and all manner of junk while retail shopping in brick-and-mortar stores continues to atrophy. The delivery margins and fees are increasing but no one seems to notice. Imagine, though, if the kids can’t get their burritos and vape pens to arrive in 5 minutes anymore because there’s no one left to bring them in crappy weather for crappy pay.
the lead up to inauguration may be the greatest ‘buy the rumor, sell the news’ event in 40 yrs. Reagan campaigned on stuff that eventually came through, but 81 and 82 were difficult for markets.
There is a (Dec. 21) 2008 NYT article titled “White House Philosophy Stoked Mortgage Bonfire” which makes me ask “How could deregulation cause any economic problems?”