The Fagan Financial Report

January 5th, 2025

Episode Transcript

Speaker 1 (00:00):
Good morning, Welcome to the first twenty twenty five edition
of the Capital District's Money and Investment Program. This is
the FIG and Financial Report, January fifth, first really big
trading week of the year. You know, the last couple
of weeks we were admired in the holidays in a
good way. Market closed on Wednesday, closed early on this

(00:20):
past Tuesday, you know, open Thursday and Friday, but with
little volume and little economic reports that were released. So
this coming week we're going to kick off in a
big way, the first full trading week of the year.

Speaker 2 (00:30):
We're going to do a little review preview.

Speaker 1 (00:32):
You know, what went right last year, what went wrong,
what did well, what did poorly? Some surprises to a
certain extent. The dollar rallied for those that those that buried,
king dollar that has rallied.

Speaker 3 (00:44):
That was the that was the talking point of twenty
twenty three. If you remember the beginning of twenty twenty three,
the death of the dollar, the emergence of the bricks
nations to take over the United States as the world's
reserve currency, which hasn't really come to fruition.

Speaker 1 (01:01):
Well, the the odd the ironic part, we'll just get
right to it. If you look at the back. At
the close of twenty and twenty one, it took a
dollar thirteen to buy a euro. Now it takes a
dollar four. Took a dollar thirty five to buy a
British pound, now takes a dollar twenty five. You know,
it took seventy eight cents to buy a Canadian dollar,

(01:22):
now takes sixty nine cents. You know, the dollar has
strengthened against the Chinese. You want, it's strength strengthened precipitously
against the Mexican peso, the Swiss franc so the Japanese yen,
it's strengthened against that. Back at the end of twenty
and twenty one, it took eight point seven cents to

(01:44):
buy a Japanese yen. Now it takes six point three
cents to buy in So the dollar is still there
and productivity United States is stronger than anywhere else, any
other developed country. Europe has its problems, and I think,
you know, we tend to think of the US as
a standalone island, but it doesn't work that way. You know,

(02:06):
we're working with global partnerships, and I think you look
at what's going to attract money. You know, no, nothing
is perfect, But we are the most perfect of the lot,
with the cleanest shirt in a pile of laundry, call
it clean or dirty laundry.

Speaker 2 (02:22):
You know.

Speaker 3 (02:22):
So even when you saw a lot of trade with
you know, a Petro dollar or you know, the Chinese currency,
or the or the Indian currency. You know, even if
Middle Eastern countries we're trading with, let's say China and India,
you know, at the end of the day, they are
converting whatever they're trading in into dollars at the end
of the day, because you know, when push comes to shove,

(02:44):
the dollar is just by far the most reliable currency.

Speaker 4 (02:48):
In the world, you know, gable. Yeah, going forward.

Speaker 3 (02:53):
You know, if you do continue to see a strong dollar,
that could be good for imports, you know, but not
as good for exports. So as you were saying, you know,
we do need this global global economy to continue to
work with. You know, I think almost fifty percent or
more than fifty percent around there of S and P

(03:13):
five hundred companies getting revenue from outside the US, So
that could put pressure on you know, that other fifty
percent outside of the US, where you know, revenue could
be maybe a little bit less if we continue to
have a strong dollar.

Speaker 1 (03:32):
Right, So let's take at let's take a look at
the indexes that did well, what did poorly. We'll go domestic,
then we'll go overseas. We'll take a look at some
of the interest rates, and then you know where we
see you know where we see the opportunity. So if
you look on the broader SMP five hundred, you had
the S and P five hundred rides about twenty five

(03:54):
percent last year.

Speaker 2 (03:56):
I think what struck me last year is, you.

Speaker 1 (03:58):
Know, fifty percent of those gains are so we're represented
by the mag seven, the test Lads, the Amazon's, the
Microsofts of the world. So I think that's the first
question that I would have erin before we dig down deeper.
And if you look at the different sectors, information technology
was up thirty six point six percent, consumer discretionary which
was really Amazon and Met up thirty percent.

Speaker 2 (04:19):
Excuse me.

Speaker 1 (04:20):
Communication services has met up forty percent, consumer discretionary, Amazon
up thirty percent. So if you look at the sectors
that outperform, there's eleven sector. Communication services up forty point
two to three, information technology up thirty six point sixty one,
financials up thirty point five consumer discretionaire thirty point one four.
Those four sectors of the eleven outperformed the S and

(04:43):
P five hundred. The other seven underperformed the S and
P five hundred, And I think as we as we
so were you surprised last year by the outperformance of
technology in twenty four and twenty three, or before you
answer that.

Speaker 2 (04:59):
I was surprised, is.

Speaker 1 (05:00):
That the S and P five hundred had second twenty
plus percent positive year, consecutive positive year, and I can't
imagine that we're going to have a third. I just
think there's some things that are going to happen this
year that's going to prevent that type of year.

Speaker 3 (05:19):
I guess I'm not that surprised. If you look at
the S and P five hundred a few months ago,
you know, it was actually on an earnings basis cheaper
than it was two years ago, which means that, you know,
revenue is growing just as much as the stock price.
So the companies in there aren't necessarily getting more expensive
or astronomically expensive like they were in two thousand and one.

(05:40):
You know, they are the most innovative companies in the world.
Technology has increased their margins. They have tons of cash now,
So you know, it's I'm not that surprised in that.
You know, if tech does good, being thirty four percent
of the S and P five hundred, the S and
P five hundred will do good. So I'm honestly not
that surprised because I think I think although they might

(06:02):
be a little bit expensive, I do think that the
fundamentals back up the prices right now. You know, you could,
you know, argue that maybe they are a little bit overpriced,
but you know, I don't think there's anything substantially wrong
with these companies and you just don't see that, you know,
you fork sense, especially with the with the Magnificent seven,

(06:22):
like like.

Speaker 4 (06:24):
You might have in the past.

Speaker 3 (06:25):
You know, there's pockets of technology, whether it be like uh,
you know, space exploration or you know, artificial intelligence, small
artificial intelligence companies that have gone you know, a bit parabolic,
but you know, I don't think the mag seven has
you know, even.

Speaker 4 (06:43):
Just look at Google. Google, although it.

Speaker 3 (06:45):
Had a good year, continued to be questioned, whether it
be Sundar PA, chise leadership, whether it be if you know,
chat GPT is taking away some of their business, whether
it be antitrust. But every time earnings came out, their
earnings were good. You know, there there the Google Clouds
revenue is growing at twenty plus percent. You know, the

(07:06):
company isn't that expensive trading, you know, I think twenty
six times earnings. You know, some might say that's expensive
historically compared to the S and P five hundred, but
I think we kind of have to change our metrics
at what.

Speaker 4 (07:18):
Is expensive now.

Speaker 3 (07:19):
I mean, I don't think price to earnings ratio is
the only thing that that you can really call a
company expensive for. So I'm not that surprised. I think
that there's only been two times in history where there's
been three twenty percent S and P five hundred years
in a row, and I think that would be a

(07:40):
bit surprising. But you know, if if earnings, if earnings
hold up, I think it's possible. But I don't think
i'd welcome it, you know, I don't think. I don't
I don't think you really want to see that, you know,
parabolicness of large cap companies. I think it's okay to
have pockets of parabolicness. And you know, the Palenteers of

(08:01):
the world, or the Rocket Labs or that, or SoundHound
or or companies like that, you know, and I think
that's okay for the market, but you know, I don't.

Speaker 4 (08:08):
I don't want to see.

Speaker 3 (08:09):
Uh, you know, major moves in these larger cap companies
because that usually doesn't end well.

Speaker 2 (08:18):
You know.

Speaker 1 (08:18):
A couple of things that you said alone along those lines,
you know, a little reviewing, and then the preview one
is that the fundamentals support the prices in it, you
know it, you know, and again, if you could communication
services to split out, really most people think Facebook, you know,
Meta is an IT company, and it is is an

(08:39):
IT company, but it's listed as communication services. Yeah, so
you know, so if you if you mump that in
with it, if you say technology, the fundamentals support these
prices for the mag seven around these levels. By and large,
Tesla's a little to whack. Apple's growth rate relative to

(09:02):
its price durnings ratio is you know, a little slow.
So there are there are there are issues. There are
pockets of issues, but nothing that would support a drastic
reduction in the prices of these stocks.

Speaker 2 (09:16):
I think that's kind of what you're saying.

Speaker 1 (09:18):
I will I will, you know I I you know, yes, No,
I don't want these stocks to go parabolic. I don't
want these stocks to really have a blowoff top the
na as that composite was up fourfold during the late
nineties from one thousand to five thousand, and literally went
back to one thousand, you know, in two thousand and
two thousand and one, and that was a very painful time.
This is a much different timeframe because there was the

(09:40):
Soundhounds and the Rocket Labs that were leading the nasdack
to a certain extent back then. They're providing them. You
for it, So I will disagree with you a little bit.
I don't want those those stocks to keep going up.
I want, I just want, I want some some rational thinking,
almost like when interest rates went up. I want reasons
to buy companies rather than like three or four years ago,

(10:01):
I'm gonna take a loan out because it's zero percent interest.
What I want is give me reason to buy you know,
Io n Q. Give me reason to buy Rocket Labs
other than just it's the stock price is going up.

Speaker 3 (10:12):
Yeah, because you know, even even a Palanteer Technologies, which
you know we own for clients and we've both.

Speaker 1 (10:18):
Actually kudos to by the way, you know, we own
two hundred some one thousand shares that you.

Speaker 3 (10:22):
Know, twenty twenty two dollars, is there a cost basis?
And you know, do I think that company will continue
to grow? Yeah, but you know a lot of companies
have to grow into these earnings. You know, revenue growth
isn't deal with things or you know, I guess you know,
the idea that they're going to be one of the
largest companies in the world in ten years, that might
be true, but that doesn't mean that they just go

(10:43):
up the entire time. You know, sometimes they have to reset.
You know, also that said, you know, we're talking about
valuations of the S and P five hundred. You could say, hey,
it's expensive, but in talking to large cat tech and
we're talking about Amazon. Amazon has three one hundred billion
dollar revenue business segments. You know, online store revenue at

(11:04):
two hundred and forty two billion, third party sellers at
one fifty two, and then eight a WS revenue Amazon
Web Services. That's one hundred and three billion dollars in
revenue they did last year, which is amazing seeing that
in twenty sixteen they had less than ten billion dollars
in revenue. So you know, I think that's kind of
the and I think you wrestle a little bit. I

(11:25):
personally wrestle a little bit about it, because hey, it's
you know, I'm so happy that we own these companies,
and I'm so happy that that you know.

Speaker 4 (11:35):
They are they're innovative.

Speaker 3 (11:37):
But at the same time, you know, and it's great
that you know, you're seeing some of your largest companies
in new I guess revenue revenue segments like web services.
But how like, you know, are you just going to
see seven or eight giant companies in the world and
buy out all these other companies and and and that
tends to spur spur and innovation. So I think that's

(11:58):
something that you know, you have to don't be a
little bit nervous about just for I guess the United
States as a whole. It's like this power grab of
five or six companies and what goes along.

Speaker 2 (12:07):
Well, and what's how that's perceived by the rest of.

Speaker 1 (12:10):
The world, you know, uh, with our allies or or
we a bully to our allies. And I think that's
that's one of the risks. And you know, I think
when you when you look at President Trump, as as
much for America as he is, you've got to be
careful that I think America has to be careful that
we are seen as allies rather than bullies, you know,
And there there's a there's a fine line between the two.

Speaker 3 (12:33):
Uh.

Speaker 1 (12:33):
You know, we have been on record for the last
you know, since the election saying that, you know, the
range of potential outcomes with the with the with the
Trump presidency is much broader than the range of potential
outcomes with the traditional politician.

Speaker 2 (12:45):
You know, tariffs can work out.

Speaker 1 (12:48):
Ah, and President Trump has a lot more experience regarding negotiating,
certainly than than than I have or you have, Aaron. Uh.
And also uh, you know, tax policies things like that, Well,
harsh measures may work out in the longer run, but
may may come, it may come a little bit of

(13:09):
issues along the way.

Speaker 2 (13:10):
Yeah.

Speaker 3 (13:11):
It's like you know, I you can now we're seeing,
you know, the convergence of business and politics, even with
the power Elon Musk has had in the Trump administration
and what he's tweeting out and you know, in in
such authority, and you know, even right after the election
basically saying that hey, you.

Speaker 4 (13:27):
Know, h one B visas are good blah blah blah.

Speaker 3 (13:30):
And you know, I think it's a lot of the
things that you know, the reason people voted for Trump.

Speaker 4 (13:36):
They kind of threw that out the door right away.

Speaker 3 (13:38):
Really, right, So this whole you know, elites oligopoly that
I think that people are are maybe looking looking at
a little bit with you know, the these billionaires in
such power. I think fourteen of there's fourteen billionaires in
Trump's administration.

Speaker 2 (13:57):
That you know.

Speaker 3 (13:58):
Yeah, it's I think it could be a little bit.
It makes me a little bit nervous for you know,
the social aspects of the United States as well.

Speaker 2 (14:07):
I agree. So, so you have, so our outlook.

Speaker 1 (14:10):
For now is, you know, positive momentum continues. The two
twenty percent moves in the S and P five hundred
will not be powered by another We think that the
mag seven continue to be supported at her near these levels.
There's nothing cataclysmic coming down the pike from those that's foreseeing.

(14:32):
We are concerned about the convergence of business and politics,
as you just mentioned, to a certain extent, and what
that pretends for America's reputation around the world.

Speaker 3 (14:41):
Yeah, I don't think it's bad for the stock market,
you know, I think I don't think it's short term
bad for the stock market.

Speaker 4 (14:47):
I think it could be long term bad for the
stock market.

Speaker 1 (14:50):
Well, eventually the stock market will follow main Street will
follow Wall Street, or Wall Street will follow main Street.

Speaker 2 (14:55):
It's all about the economy.

Speaker 1 (14:56):
Stupid as I think, James what his name back in
with the President Clinton said James was his name. He
was a Democratic strategist. I can see him anyways. So
and I also think, and we'll get into the Russell
two thousand, which is the second, third thousand largest American stocks.

(15:16):
So the S and P five hundred, everyone knows what
that is, up twenty five percent, the Dow Jones industrial
average up fifteen percent, So the S and P five
hundred outperformed the Dow Jones industrial laverage by sixty six percent.
The navs that can posite up twenty nine point six percent,
so the nas that go up a little bit more
than the S and P five hundred. Where you know,
we'll we'll move to the first laggard really was the

(15:39):
Russell two thousand, the second and third thousand largest American stocks,
up eleven point five three percent. So I think that's
something that many thought, would you know, kind of turn
on its jets a little bit in the year in
twenty twenty four and did not for the.

Speaker 3 (15:57):
Variety, you know, but I also so think that if
you just kind of remain patient, you will be rewarded
with ups with mid caps. You know that said you know,
it's we are large cap investors really, uh for the.

Speaker 2 (16:13):
Most yes, we are we most part, we are.

Speaker 3 (16:15):
The most part we're large cap investors. And you know, again,
as I was talking with the Amazon, you know you're
seeing the large You're seeing large cap companies being the
most innovative. Yeah, you have unicorns that are small in
mid cap, but you know, when you're investing small and
mid cap, I believe that the fundamentals matter way more.

Speaker 4 (16:35):
I think that a lot of good point.

Speaker 3 (16:37):
You know, managers can can do really well in the
value mid cap small cap space. But you know, I
don't know, I just kind of I think the the
the indices as a as a whole, could you know,
just continue to lag as you know, you know, even
the larger cap companies have the best talent in the
world as well.

Speaker 1 (16:56):
You know, I'm going to digress completely because it's I
think it's a really good topic and something.

Speaker 2 (17:01):
That I that I heard. I forget where I heard it.

Speaker 1 (17:05):
The German economy is struggling because they are more industrial
based than the US. Okay, US, and we were just
talking about this, so I'm not digressing whole you know,
or doing a one eighty, but here we are the
technological leaders of the world and we're trying to bring

(17:26):
more manufacturing an industry home. Now that may be good
for you know, to not have our supply chain at
the so for us not to be at the mercy
of another country with our supply chain, but is it
good for the economy. The reason my point with that
was that if Germany's German's economy, Germany's economy is struggling

(17:51):
because they're industrialized, industrial based, why do we want to
get more industrial based?

Speaker 2 (17:57):
If if we are.

Speaker 1 (17:59):
And they want to get more technologically based, but they
can't take it away from us. So my question is
is that not a question but an observation. I think
that we've got to be careful that we don't you know,
we have the goose that laid the golden egg. Do
we really want to go you know, you know, you know,
one hundred miles an hour into something that maybe is

(18:20):
maybe may maybe slowed our slow down our industrial growth
or our growth slowed down or innovation and like or
maybe I'm answering my own question, and then I want
your input. Are we doing it A to bring production
home for security purposes and B to enhance productivity and
technological gains because these are actually ancillary industries that will

(18:45):
that will help us technologically.

Speaker 4 (18:48):
I think it's a little bit of both.

Speaker 3 (18:52):
I think that you know you're seeing just for example,
Meta has seventy two thousand employees. You know, in nineteen ten,
us Steal, the largest company in the world, had one
hundred and seventy thousand employees. So I think I think
that I think that you need to bring jobs back
home to give good jobs for Americans.

Speaker 4 (19:13):
With the.

Speaker 3 (19:16):
Knowledge that that might be a little bit inflationary. I
think what's worked for the past thirty forty years in
the United States, you know, got us.

Speaker 4 (19:24):
To where we are.

Speaker 3 (19:25):
But you know, I do think that I do think
that it's important to bring good, high quality jobs back
to the United States, just for me, just to the
socioeconomics of it, and the and I think the wealth divide,
you know, it is the biggest I think it's the
biggest threat threat to to to something you know, substantial

(19:49):
happening to America.

Speaker 1 (19:51):
Yeah, I think you know, the inflation adjusted earnings for
the middle class, you know.

Speaker 4 (19:56):
The death of the pension.

Speaker 1 (19:58):
The latest this is a the latest hypothetical inflation adjusted
annual earnings are fifty one five ten, down six point
five percent from fifty years ago.

Speaker 2 (20:09):
So think about that.

Speaker 1 (20:11):
You know that inflation adjusted, there's actually been no wage
growth in the US for the past fifty years for
the middle class. I think that that's kind of what
you're talking.

Speaker 3 (20:19):
About, you know, and I and I think, yeah, I
think that's the big that's the biggest problem. You know,
ten fifty percent of people had pensions in nineteen eighty.

Speaker 4 (20:28):
Now it's ten.

Speaker 3 (20:30):
It's just these it's it's it's uh, you know, putting
the putting the stress on on the employee rather than
the employer.

Speaker 4 (20:38):
Is hasn't been great. You know.

Speaker 1 (20:39):
The invention of the four world has been great for
the stock market. It's been great for the stock market.
It's been great for which I'm not I'm not cheering that.
I'm just saying that, you know that that's that would
be the counter It's been great for the stock market,
and it really it's been great for productivity in the
US and that's what drives you know, a lot of
our economy.

Speaker 2 (20:56):
But so stick with midcalfs.

Speaker 1 (20:57):
So so that's another So that's another recommendation that we
would make to our listeners and something we're going to
follow with. And how can you stick with midcaps? There
the RSP equal weight to S and P five.

Speaker 2 (21:09):
Hundred index.

Speaker 1 (21:12):
Would be would be one the IWM, which is the
I Shares Russell two thousand ETF. I think it's a
good way to stick with mid caps. I think if
you look at that over the past year, it's up
around twelve or thirteen percent, as you can imagine, because
that's what midcaps are doing. Uh, you know, I would
not go down to the small caps, you know. I
don't think that that's a really good idea.

Speaker 2 (21:31):
The s c h A.

Speaker 3 (21:32):
I think with investing, you have to invest in you know,
what you know to a certain extent and relying good
managers to you know, invest in what you don't know.
If you think value is going to do good, I
would I would much be more inclined to find a
good value manager. Same with midcaps, same with small caps,
same with biotech.

Speaker 2 (21:49):
Really, so where we're so where would you say me, I.

Speaker 3 (21:51):
Think JP Morgan has a great fund. It's a JP
Morgan Active value fund.

Speaker 2 (21:56):
Java JI d I.

Speaker 3 (21:59):
Is a great fund. Jensen quality growth, although it's more growthier,
it's kind of more you know, stable growth.

Speaker 2 (22:06):
And that's it. That's the open end of mutual fund
j E N s X.

Speaker 3 (22:09):
Yeah, and they just came out with each E t
F as well. And then on the mid cap and
small cap, we really don't. We don't have any madcap
our small cap really right now, as opposed to we
do own some IWL i W individual stocks that are
considered mid cap, but no ETFs, CO, ow Z, Pacers,

(22:31):
cash Cow, E t F. That's I think like fifty
percent mid cap as well. And n OBL has you know,
twenty or thirty percent make cap.

Speaker 1 (22:38):
We own a bit of sc HM, which is a
Schwab Camp BTF. But but you're right, if you had
a break down our uh our capitalization exposure, the vast
majority of our our assets are allocated towards you know,
large cap stocks, large cap stocks, large cap ETFs uh.
You mentioned a few of them, jep jep Q s

(22:58):
h B, which is a broad market index VOVTI, things
like that which are just large company says, if you
go to a website at Fagan Asset dot com, you can,
you know, find the list we've updated through November. Of
the next few days, we'll update that all those numbers
through December and then go from there. So we're kind
of running out of time in the first half, so
we when we kick off the second half, we're going

(23:19):
to talk a little bit about international markets. We're going
to talk about actually, first of all, we'll talk about
the different sectors. We'll talk about international markets, and we'll
touch based on where we see interest rates going for
twenty twenty five. But right now, it's ten thirty on
the station you depend upon for news, weather, and information

(23:39):
in the Fagan Financial Report, News Talk A ten and
one O three one w g Y. Good morning, Welcome
back to the second half our of the Capital District's
Money and Investment program. You're listening to the Fagan Financial Report.
We just spent the first half of this radio show,
you know, discussing the US stock market and then what
led what didn't lead this half, we're going to break
it down into individual sectors. There's eleven s and p

(24:02):
five hundred individual sectors, Communication services, information technology, financial and
so on. We'll talk a little bit about that where
we see those different sectors going, and then branch off
into international and then finally touch on interest rates. We've
got about twenty four minutes, so let's kick it off.

Speaker 2 (24:24):
Are you know we we.

Speaker 1 (24:26):
The sectors that really stood out. I think as you
look at as you look at the stock market last year,
communication services up forty point twenty three percent, you had
information technology up thirty six point sixty one percent, You
had financials up thirty point five percent. And I think

(24:47):
if you take a look at financials, I want to
circle back to that, and you had consumer discretionary up
thirty point one four percent. And those four sectors outperform
the S and P five hundred. The other seven sectors
underperformed the SMP five although utilities did twenty three percent. Utilities, though,
if you look at a three month trail, we're actually

(25:09):
down about five and a half percent, So all of
the gains for utilities came in the first nine months
of the year. So that's something to think about going forward.
Interest rates, they tend to utilities tend to respond inversely.
The interest rates and interest rates picked up a little

(25:29):
bit during the second half of the year, especially in
the fourth quarter. Weight on utilities industrials up seventeen point
three percent, consumer stables up fourteen point eight seven percent,
Energy of five point seven two percent, real estate of
five point two three healthcare of two point five eighty
Materials down zero point zero four percent. Any observations from
all of that that you can you can glean.

Speaker 4 (25:51):
Air Energy did better than I thought it did better.

Speaker 2 (25:54):
It was down or up five point seven two.

Speaker 4 (25:57):
But for some reason I just thought it was down.

Speaker 3 (26:00):
So Energy did better than I thought it was, although
it you know, it lagged precipitously to the S and
P five hundred, and I thought it struggled even more.
I'd like to know how Energy did outside of Exon,
though I bet you it was down. Energy X Exon, Well,
I think Exon is like twenty five percent of the.

Speaker 2 (26:17):
X l A.

Speaker 1 (26:18):
Yeah, if you look at Exon over the past year.
Actually stock was only up eight percent over the past year.
It's according to according to my records, and this is
according to Y charts, So it might not have included
the dividends. So maybe with a you know, a dividend
of two or three percent, it might have been up
ten percent.

Speaker 2 (26:34):
But you're right.

Speaker 1 (26:34):
Xon is twenty two point eight five percent of the XLY,
Chevron fifteen percent, Conical, Phillips eight.

Speaker 3 (26:41):
I think.

Speaker 2 (26:41):
I think energy is going to have a decent year
this year.

Speaker 4 (26:44):
Yeah, me too.

Speaker 3 (26:46):
I think just from evaluation standpoint, it should do good.
There's I forget what I was reading last night, but
there's some issues with European energy right now. I don't
know get what it is you reading that last night
at all. No, someone's selling not selling energy to someone else.
So I think you could see a lot of volatility

(27:09):
and energy which could lead to the to the sector
overall going up.

Speaker 4 (27:13):
So I think you could continue to see that.

Speaker 1 (27:15):
I think President Trump is going to President elect Trump
is going to try to open markets for energy companies.
I think that'll be a plus. I think the AI,
the demand for energy is going to increase. I think
that give given the how artificial intelligence the Data Center's SAP,

(27:36):
I think plus.

Speaker 3 (27:38):
Twenty nine percent of all of Virginia's energy right now,
which is kind of insane.

Speaker 2 (27:41):
It is crazy.

Speaker 1 (27:42):
So and I also think that prices will stabilize, so
you know, So those are some things that are coming
out of twenty and twenty two, so December twenty ninth
to twenty twenty three. You know, crude was about seventy
bucks a barrow. Now it closed out last year at
about seventy bucks a barrow as well. But I think
the lack of performance and energy A lot of people

(28:05):
anticipated energy prices to go up last year and they
did not, and I think that was disappointing. This year,
I think a lot of investors are expecting energy prices
to stabilize or drift maybe five or six bucks a
barrow one way or the other. So I think that
most of the bad news is built in. I think
you also have other sectors that kind of really ran
some of the ones we previously named during.

Speaker 2 (28:26):
The show, So I think you have that.

Speaker 1 (28:31):
Investors looking for alternatives to the large technology companies as well,
So I would expect energy to do better.

Speaker 2 (28:37):
You know, I also think air.

Speaker 1 (28:39):
Healthcare healthcare was up two point five to eight percent
last year. The last three months, healthcare was down ten
point three percent. Why was healthcare down ten point three percent?

Speaker 4 (28:50):
I mean, and got pummeled at the end of the
year too.

Speaker 2 (28:52):
Right, you know.

Speaker 1 (28:54):
I think I think it was also down because of
President the election of President Trump. Just the past month,
energy was down or healthcare excuse me, healthcare was down
six point two percent. So December was down six point
two percent, October November, December was down ten point three percent.
And with the election of President Trump and the rhetoric
regarding healthcare, and I think every election brings the cry

(29:21):
of We're going to reign in healthcare spending, and it
hasn't been done. So I'm of the opinion that I'll
believe it when I see it. And right now, I
think the stocks have sold off too greatly because investors
think that they're actually the government's actually going to get
something done this time.

Speaker 2 (29:41):
I hope they do. I'm doubtful.

Speaker 1 (29:44):
So I think energy has a snapback rally in twenty
twenty five, at least for the first quarter or so.
As I look at this, utilities I think are relatively
fairly valued. You know, we've mentioned communications services IT and
consumer discretionary you know, as represented by the larger cap

(30:09):
technology stocks. You know, I think they're fairly valued. No
real danger there, well, a little bit of a loaded question.
Financials are up thirty percent. We own Visa, we own MasterCard,
we owe JP Morgan, we own Bank of America. I
don't have our waiting our sector waitings with us. But
where do you see financials in twenty five I know,

(30:29):
I know you've never been really warm on that sector.

Speaker 3 (30:32):
Yeah, I mean, if I think if rates stay here
or go down, they should continue to do well. You know,
I really like Schwab. I think Visa MasterCard will continue
to do well as long as the consumer does well.
But at the same time, I don't think the consumer
could be doing much better than it is now from
a Visa MasterCard standpoint. So but you know, I like
JP Morgan, I like Bank of America. I think you're

(30:53):
just continue to see the larger banks do good and
the regional banks continue to struggle. So that's why, you know,
and I think Schwab you know, has a little bit
of a you know, duopoly with them in fidelity that could,
you know, And I think Schwab will continue to, you know,
be a leader in that industry.

Speaker 1 (31:11):
So, you know, the old age it's a stockpickers market,
but I do think it is. I think it's always
a stockpickers market. It always is, sometimes more so than that.
But I think this year, I think you see pockets
of opportunity even within sectors that we might be lukewarm at.
You mentioned Schwab as as a company within that sector,

(31:36):
and I agree with that. We do clear through Schwab
full disclosure. And I also think within healthcare. You know,
healthcare may not do great, but I think there are
some opportunities there. And but I kind of paint a
decent broad brush with energy that I think will do well.
Anything else like a sector type of a look air
that you want to and you can play that through
any one of a number of ETFs S and P.

(32:00):
There's a broad based ETFs. You know that it's put
out by a Spider S and P ETF group and
you can Spider State Street Global Advisors and you can
use anyone of a number of their vanguards, got tons
of them. There's different sector ETFs. You can dig down

(32:22):
a little deeper if you want to get into the
you know, the individual components of that sector, if you
want to get into the different parts, like there's I T,
but there's also application software.

Speaker 2 (32:33):
There's software.

Speaker 1 (32:33):
They're semiconductors, so you can slice and dice it the
way you want. But if you wanted to play a
broad sector.

Speaker 3 (32:38):
And I think you know, from an investing standpoint, I
think you have to. You know, I do believe you
have to invest in what you know. We're we're more
large cap growth investors in my opinion. They're the things
that we know how to value the most. And I
think that's great when you're investing for individual stocks, I think,
but I also think at the same time, what we

(32:59):
try to do is we try to look at macroeconomics
and what sectors will work within within macro recon within
this macroeconomic environment, you know, materials, healthcare, real estate, energy,
and we try to use ETFs or you know, other
active managers to I guess help us out if we think,
I guess the macroeconomic backdrop looks good for overall sectors.

(33:22):
So you know, it's hard to go over every single
sector and tell you how you think about it, you
know what I mean. So it's like, you know, do
I think healthcare, I think healthcare should do good. Yeah,
I think healthcare should do good. Real Estate I don't know,
So we don't invest in it. You know, I think
sometimes you have to say, I don't know, maybe I'll
miss the boat on this, but it's just not in
my wheelhouse. Options not in my wheelhouse, don't invest in them.

Speaker 4 (33:44):
Things like that. So I think it's important as.

Speaker 3 (33:47):
An investor to know what you what you're good at valuing,
what you're not good at valuing, and you know, getting
some help.

Speaker 4 (33:56):
If you think some sectors look good.

Speaker 2 (34:00):
Through active ETFs, through passive ETF store through.

Speaker 3 (34:03):
What you don't want to do is get that sector
right with the stock wrong, you know, And I think
that's I think that's very possible if you're investing in
individual stock. So you know, you'd hate to, you know,
get hey, you know, I think that you know, just
just for example, you know, I know healthcare didn't do
good last year, but you'd hate to let's say, pick uh,

(34:24):
you know, Johnson and Johnson or.

Speaker 4 (34:26):
U n H. You know when Eli Lilly was up,
I know, you know.

Speaker 3 (34:34):
So that's why we try to also use et s
to uh get more of a broad a broad uh
you know, if the macroeconomics fits the sector.

Speaker 1 (34:46):
And you also have to ask yourself what you're expecting
from a company, you know, Johnson and Johnson as a
three point four percent dividend, you know, so you know,
granted the stock price did not do much, but I
actually went down a little bit, but you got to
ask yourself what you're expecting from that sector, where you're
looking for growth and where you're looking for income. Moving
to international, Morgan Stanley Composite Index excluding the United States

(35:14):
was up six percent last year. Three year trail of
one point three to five percent, five year trail of
four point six one percent, ten year trail of five
point three one percent. So ten year trail of five
point three one percent pales in comparison to the S
and P five hundred and thirteen point oh nine to

(35:38):
five year trailing average annual return of four point sixty
one pals in comparison by almost ten percent to the
five year trail the S and P five hundred, an
average annual turn of fourteen point five percent, three year
three year trail International one thirty five, SMP eight ninety two,

(35:58):
and again the twelve month six ZHO nine International more
than four times that. Domestically, as far as as represented
by the S and P five hunded up twenty five percent.
Target funds have suffered because those passive target funds out
the if the US is roughly sixty percent of the global.

Speaker 2 (36:21):
Market.

Speaker 1 (36:22):
Publicly traded market capitalization. That means target funds have forty
percent of their equity exposure overseas, and I just gave
you the numbers how poorly they've done. So you want
to check your target fund and make sure that you
know you have the target fund that you want. That's
one of the reasons we stay away from target funds
generally speaking. But that does beg the question where do

(36:45):
we go from here with international And I think I
can probably answer the way you would answer, because we
obviously work together, we manage money together.

Speaker 3 (36:57):
In that.

Speaker 1 (36:59):
Are it's almost reflective of what you just said a
few minutes ago, that you have to invest in what
you know to to a great extent, and we feel
more comfortable domestic large cap individual securities. Where we step
out of that, where we're out of that comfort zone,
as you mentioned, we'll move with the ETFs or open

(37:20):
ended know little mutual funds that are either passive, passively
or actively managed, and we do go overseas for some diversification,
but we're well underweighted, well well well a fraction of
what the global market would represent of publicly traded companies,

(37:40):
and we're probably going to stay that way.

Speaker 2 (37:43):
And I don't know, if you were, what do you think,
you know, yeah, you know, there's much more to it
than that, really, you know.

Speaker 3 (37:52):
Yeah, I think that international will continue to have issues
going forward with just you know, becoming a little bit outdated,
not being the place where innovation is. But you know,
I think we could also see them turn it around
from a political standpoint. But I think until until we
see some you know, substantial change and some innovative coming

(38:13):
out of Europe, I think it's something that you kind
of have to stay away from s EHF though, you know,
it's about fifty percent, yeah, Europe and then thirty thirty
six percent, you know, Asia. So I think you could
see some maybe some outperformance in emerging markets Asia, specifically India, China,

(38:33):
maybe even Brazil. Argentina is getting their act together a
little bit maybe, So I think you.

Speaker 4 (38:39):
Could see you know, emerging markets do well. But yeah,
we are we are historically quite underweight.

Speaker 2 (38:47):
The Indio India Fund IFN was basically flat last year.

Speaker 1 (38:54):
It's up fourteen point one percent over the trailing three years,
which again is you know, probably half of the US.
Over the trailing five years, it's up sixty three point
sixty one percent, so right in line with the US.
You know, I guess what I wonder is we'll see,

(39:17):
we'll see. You know, we don't have any exposure to India.
We love the economic story just due to the diversification
away from China by US manufacturers. And yet I wonder
when everyone's expecting something to happen, it usually doesn't. It's
the bushet don't see that hits you. So I'm wondering

(39:38):
if a lot of that good news is priced. And
I do think it's a secular story, so it's something
we want to keep an eye on him.

Speaker 2 (39:43):
But I would I would play that with with.

Speaker 1 (39:45):
The the India Fund IFN as opposed to what we
would individual stocks for the reasons that area.

Speaker 4 (39:51):
And we don't have any money in India either.

Speaker 2 (39:53):
No, that's yeah, no, no, not even with the IFN.

Speaker 1 (39:57):
And unless it's you know a couple of people here
or there that they want.

Speaker 2 (40:00):
So that's so, you know, stick with the US.

Speaker 1 (40:03):
I think I think the economy is still strong, Unemployment slow,
inflation is moderating. We don't think it's coming down to
two percent anytime soon, just given the fact that wages
are still kind of going up a bit and there's
we're still a GDP still three percent. I think the
the the we are in the normal period now as

(40:23):
far as inflation goes at two to three percent, rather
than from two thousand and eight to twenty twenty where
the FED had a difficult time getting inflation up to
two percent. So I think we're we're we're in that
period of time right now where we were. Inflation is
coming down, but I think without really demoralizing the economy,

(40:44):
I think it's going to be difficult for the FED
to get inflation down to two percent. Uh, anything else
pertending to the equity markets there and you want to
you want to talk about before we move on a
little bit too?

Speaker 4 (40:56):
Not really sure. Yeah, I think we covered every single.

Speaker 1 (40:59):
Thanks try to anything that, uh you want to talk
about in jener Your family's doing well.

Speaker 2 (41:05):
You had a nice holiday, yep, okay.

Speaker 3 (41:08):
Yeh had a you know, I had a good holiday.
It's nice to get back to work though.

Speaker 4 (41:12):
You know.

Speaker 3 (41:12):
Tourist and slot came out with the global market in
twenty twenty five, and you know, I think that you know,
some of some of these really stick out to me,
and you know, and I think that's it's things that
are that everyone's nervous about. You know, the possibility that
the Fed is going to raise rates in twenty twenty
five is at forty What do you think of that possibility.

Speaker 2 (41:35):
I think it would be towards the latter part.

Speaker 3 (41:37):
So I think, I think, yeah, that's kind of what
I think. I think it'll be a last ditch effort.
I think they'll do everything that they can keep rates
where they are, you know, finagle with monetary supply things
like that before they I think it'll be a last
ditch effort, and if if that does happen, it'll cause
a substantial pullback ten plus percent. You know.

Speaker 1 (41:56):
I guess my biggest worry for the market this year
as we sit here on January third, is too high
expectations for the benefits of what President Trump might might do. Okay,
of the steps is going to take too high expectations
for the Department of Government efficiency, how they're going to

(42:17):
you know, get government spending down, and maybe not too
high eventual expectations. I want this to come out the
way right in as much that I'm not making a
comment on the long term benefits of these tariffs or
the getting the government spending on their control they're all great,

(42:39):
or the government spending especially is all great.

Speaker 2 (42:42):
It's good.

Speaker 1 (42:43):
However, there's an old Inglish priverb. My dad always used
to say, many a slip between the cup and the lip,
and you know, we'll see how it goes between now
and then how it's executed, and even perfect execution. You
can't quantify human behavior. We can't quantify how other countries
are going to behave And although maybe they'll come in
line with tariffs and maybe this, maybe that, you know,

(43:05):
I just think that's my biggest worry for next year
is that we have two high expectations for a lot
of Americans have two high expectations for a Trump presidency.
We just came off four years of an average annual
return of fourteen percent for President Biden, love him or
hate them?

Speaker 2 (43:23):
So that was good.

Speaker 1 (43:25):
Okay, we came off twelve percent plus a year for
President Trump love them or hate them from the prior administration. Now,
as we move forward to the next and we just
came out for four years at twelve and four years
at fourteen, some of the good news might be already
baked into the proverbial stock market cake.

Speaker 3 (43:43):
The ten year average return for the S and P
five hundred is thirteen point oh nine percent. So you know,
the ten year average return for the S and P
five hundred growth is fifteen point two eight percent.

Speaker 4 (43:54):
That's ten years.

Speaker 1 (43:56):
So if the average is ten percent. In the speed
limit sixty, you're going we've gone n miles an hour
without a ticket, really brief tickets, but we've gotten way
back on the interest.

Speaker 3 (44:03):
You know, we could be in this age of innovation
where you know, historical valuation metrics don't matter as much
and you have to shift what you know what is
what makes a company valuable. But at the same time,
you know, the valuations can only historical valuation metrics can
only get so stretched before you know, something happens. Or

(44:26):
let's say you know that even in this is a
forty percent chance of Germany going to a recession. You know,
if you see larger, more populous nations struggling more in
fifty percent of the S and P getting revenue outside
of the United States, then that will obviously translate because
we are a global economy eventually.

Speaker 1 (44:45):
So we'll so we'll see how it works out. You know,
I think that but that that that's my big my
biggest words. But on the other hand, and I always like,
I'm I'm always worried anyways, you know, and then your
mom says that we always worry. You know, you're not optimistic,
guess the kids. But I asked the kids, and you
said that was optimistic person, right, I never said that's
around the air. Okay, great, But my point is that so,

(45:08):
but that's the worry is that they're so I'm going
to play the other side of the coin is that
there's a lot of people that are are skeptical about
where the market is. I don't think euphoria has kind
of we've kind of run away with euphoria. If you
look at the American Association of Individual Investors, thirty eight
percent are bullish. This is as of December twenty seventh.

(45:28):
I haven't looked at the recent one thirty four percent
parish and twenty eight percent neutral. So it's not like
we've run away and we're in a period of euphoria
like the late nineties.

Speaker 2 (45:37):
I think people are still a little bit concerned.

Speaker 3 (45:39):
Yeah, and I think you know, just because you know,
one year might mean something to Earth, but it doesn't
mean anything to the stock market. You know, just because
five days ago was twenty twenty four and now is
twenty twenty five, and my opinion doesn't you know, your
opinion shouldn't change just because it's a new year. Now,
what if I think the biggest surprise that could be

(45:59):
possible this year is that is that technology outperforms again
this year. And I do think that is possible just
with you know, the larger technology companies having their hand
in this next generation of you know, you know, artificial
intelligence and just technologies where you're seeing, you know, the
ones that could go parabolic are five, six, seven years

(46:19):
down the roads.

Speaker 1 (46:20):
And there are a lot of individuals that are smarter
than I that are not in this business, but in
the technology, technology, technology industry, that are very bullish about AI.
They're very bullish about the potential for I do want
to spend a minute or two. We got two minutes left,
have two minutes left to talk about interest rates the
ten years at four sixty two.

Speaker 3 (46:40):
It just continued it can it's the first time ever
four fifty five or story now, first time ever that
there was one percent rate cut and a one percent
move up.

Speaker 2 (46:52):
In the ten in the ten year.

Speaker 3 (46:53):
So that says that, yeah, non, I think that's you know,
I think the biggest threat to this year is this
experiment really that you know, this administration is beginning, doesn't
work out according to plan, or doesn't work out as
quickly as we want it to, which means inflation's here
for longer, which could mean the drop in GDP to

(47:15):
get to maybe where we.

Speaker 4 (47:16):
Want to be in three or four years.

Speaker 3 (47:18):
But you know, I think we could have some you know,
hiccups along the way with never having done these policies before.

Speaker 1 (47:26):
I agree you can't expect them to go perfect, but
I do think a ten year moving up from these
levels at some point in time is going to matter
to investors.

Speaker 2 (47:35):
So we've got to keep an eye on that.

Speaker 1 (47:37):
The yield curve is normalizing, which means that longer dated
treasuries are paying more than intermediate and shortitated treasuries. The
thirty year ended twenty twenty two twenty three. Excuse me
a four percent, it's for eighty two. The twenty year
ended at four twenty, it's forty nine. The ten yure

(47:58):
I mentioned at three eighty eight to sixty two, So
we're getting more normalized, which which also provides for rational
borrowing and spending. Anyway, that'll just about do it. Feel
free to call us during the week at five point
two seven nine, ten forty four. Check us out on
new webit, fagan asset dot com. Like us on Facebook.
I think I wish, we wish everybody very happy, healthy, prosperous,

(48:22):
and really a new year where people are kind and
considerate and uh you know, think about really the things
that matter in their life.

Speaker 2 (48:30):
Take care