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but if we look at the 2025 environment it's a great setup because we have a new Administration coming in that's maybe Pro Animal Spirits you know a trump put we have a doish fed and as you're pointing out interest rates are kind of calming down after rising and we know there's still 7 trillion cash on the sidelines and I think sentiments coming back into check you mentioned that before with the a AI num so I think it's a good setup for investors I wouldn't be too worried about the next 12 months Tom Lee of fundstrat remains optimistic about the invest M outlook for next year citing easing inflation a doish federal reserve and strong cash reserves as key positive he highlights the potential impact of a new Administration fostering investor confidence and notes a shift towards cyclical stocks and small caps which he expects to perform well as economic conditions stabilize Lee emphasizes that us equities Remain the best investment option despite mixed sentiment among investors about focusing on Tech Giants versus other sectors while acknowledging potential Market pullbacks he believes favorable monetary policy and easing geopolitical risks will sustain the bull market into the new year um so we can stack up all the positives I mean I know you've been kind of in gear with that uh idea that the economy would power through inflation would come down the FED could become friendly or earnings are going higher big question to me is how do we set expectations for the year to come given that uh that's all in the books um it's a great question because you know we have two backtack 20% years and now investors are wondering how much good news is baked in let's bring in Ed yardeni this morning talk more about the markets of course yardeni research president uh Ed happy Black Friday great to have you thank you um you've been writing a lot obviously lately about the coming year and actually the next few years I know we're we've talked a lot about your 7K Target your 10K Target down the road um to Sarah's point about the market broadening is that I guess healthy on a net basis absolutely you remember when this uh bull market got got started it was kind of like the Rodney danger field bull markets it got no respect because it was so narrow and we argue that give it some time it'll it'll broaden and that's what it's doing now and we've seen certainly seen the midcaps uh go on fire and then uh the the S&P 493 I think are going to do well increasingly well what do you think's going on with these yields um are are Bond vigilantes uh convinced that there will be constructive work done in this Administration yeah absolutely I think the Trump Administration uh incoming Administration uh bought some time uh kind of plated the the Bond vigilantes by uh basically acknowledging that we've got a problem with the deficit and the new incoming treasury secretary is somebody who's got a a lot of market experience so he's kind of like one of us if you will when the market looks at uh at at this Administration and the fact that they're in fact going to go after a spending uh and that they're going to try to raise some revenues maybe with a an a cross the board terrorist at Le at least shows that uh they're they're cognizant of the problem and and maybe they're kind of having a Bill Clinton moment remember when Bill Clinton was warned by his advisers don't mess with the Bond vigilantes and uh we actually had a very conservative fiscal policy back then well I mean analoges to the mid90s are pretty positive and there has been some work done looking at what happens when you bring the budget deficit relative to GDP lower kind of it's an everything rally is it not it becomes an everything rally and you know the only risk is that it becomes too much of a good thing that it becomes a melt up and uh we're kind of on the edge there right we've got the valuation multiples which are quite elevated we've got the forward PE around 22 we've got the Buffett ratio around 2.8 which is a record high we've got Warren Buffett himself raising a lot of cash which kind of has everybody some somewhat concerned uh but all in all it uh I think the bull market is still very much here and continues into the next year and I don't see a recession recessions are usually called caused by credit crunches and that's not happening with the FED inclined to lower interest rates it's not happening with the price of oil unable to uh have a rally with geopolitical risks which seem to be actually narrowing so the only thing left to worry about about I think is tariffs and uh right now it looks like they are being effectively used for negotiating purposes I mean there's been so much so many flows into US equities because of all these reasons we're talking about epfr reported 141 billion into US equities hug and that's that's for the month the heaviest inflows in a 4-we period on record so do you want to just continue that Trend or do you want to go somewhere contrarian like Europe where everybody hates right now well you're asking the wrong person I been recommending uh stay home versus Go Global since 2010 I've been recommending overweighting the US and uh it's been on fire recently but you're right from a contrarian perspective maybe it's worthwhile looking overseas uh a little bit but no I I I'm going to recommend continuing to to stay home um invest by by the way the the I I I I I I don't like what you just said because it's that's talk about contrary indicators when foreigners really cover the the the US uh that's that can be a contrary indicator uh but that doesn't necessarily mean you want to go overseas so look I'm not ruling out the possibility that we'll have some sort of uh pullback uh I think it's Mike Santo's favorite phrase I I like it better than Corrections in bare market so we could have a pullback obviously maybe in the new year but right now we're still got a Santa Claus rally in my opinion final trade time Steve Bitcoin or BTC Gray scale mides any way you want to play it play it Karen you know I'm a long-term investor so I like Boeing during the E block when I in the G block I still like it Bo Happy Thanksgiving everyone gu yeah I'm thankful for my family who tolerates me they're watching now for the first time in a long time and I obviously thankful for all you and not watching anymore Al like Bob is picking up some steam here so don't be too worried I mean it seems as if they're all these supportive factors and when you mentioned the 2 20% uh up years in a row history says actually you know the following year is up more often than not as well what what do you mean do you think specifically by the new Administration being pro-animal Spirits first of all it's true you kind of seen it at work um it seems to pull in that direction but is there are there specifics that the market is fixated on that it's going to drive that Dynamic uh yes I think that the Market's trying to figure out exactly how this animal spirits plays out in markets but I would say we've got a treasury secretary that Equity Market it's approve of we we do know that the the last Trump presidency was cared very much about what stock prices do and Jeremy seagull said this is the most stock market focused president ever and I think that the uncertainty is around trade and the potential risks around tariffs but we'll have to see I mean that's something markets are going to have to like deal with it from an uncertainty perspective it's interesting to me that you know the way the market has behaved in the last several weeks but even going into the election was we need to owe more cyal we need to ow more financial stocks we're going to repic this market for a maybe a growth acceleration even or at least uh maintaining above Trend growth meanwhile though we're only a couple months removed from a pretty big growth scare job growth has kind of slowed to a point the housing market seems pretty locked up it's kind of interesting how the sentiment has kind of jumped ahead is the economic numbers position to actually validate that view markets tend to be forward looking so I would expect this I know there has been a recession in durable goods and in housing and Auto Sales principally because of high rates which have made affordability an issue that's really on the come next year I mean I think the spread of ten years and mortgages should come down and the tenure hopefully behaves and I think if if there's more confidence and more Supply I think housing actually could lead this recovery I I think that's why home builders actually started to act better this week as well yes uh they seem very sensitive too to the yields you know sort of halting their rise as well I guess the question is if we believe it's still a supportive environment then pretty much all the things you can identify would suggest you shouldn't be too worried about next year the second question is is something like the S&P 500 the best vehicle to capitalize on that um I think investors are still trying to figure this out we did a survey with our institutional investors and and our raia clients last week the majority of institutional investors don't think Fang is the leading trade they're actually betting on cyclicals but if you look at the raia world uh the majority are betting on Fang so I think the market is still undecided whether to be long the mag s or the cyclicals I'm inclined to be more cyclical and bet even on small caps having a a very big year next year yeah Tom Lea fundstrat is optimistic about the investment outlook for the coming year citing easing inflation a doish federal reserve and a market friendly Administration as key factors he emphasizes opportunities in cyclical stocks and small caps while highlighting strong cash positions and improving sentiment as supportive for continued market growth despite potential minor pullbacks Lee remains confident in the bull market pointing to stable monetary policies and diminishing geopolitical risk he encourages investors to consider whether to stay focused on us equities or explore undervalued International markets like Europe will cyclical stocks and small caps outperform Tech Giants next year how might the new administration's policies influence your investment decisions
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