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It's a real head scratcher, right?

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The stock market is setting new records every other day,

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but at the same time,

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you've got all these economic warning signs flashing.

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Yeah, like storm clouds gathering on the horizon.

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It's a bit of a paradox.

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Exactly.

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So today, we're gonna try to make sense of it all.

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We're diving into Ocean Park's latest investment insights

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to see what they have to say about this strange situation

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and what it all means for our wallets.

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Yeah, Ocean Park just released this report

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called Riding High, Looking Ahead, Markets at a Crossroads.

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And they really get into the nitty gritty of what's going on.

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They look at inflation, interest rates, politics,

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the whole shebang.

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Okay, so let's start unpacking this,

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starting with inflation.

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It feels like we've been talking about inflation forever now.

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What's Ocean Park's take on where things stand?

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Well, he used this interesting phrase,

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the last mile of inflation.

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Basically, they're saying that, yeah,

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we've seen some relief from those peak prices

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we saw a while back,

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but getting inflation back down to that,

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that ideal 2% target, it's proving tougher than expected.

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I get that.

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I mean, things have calmed down a bit,

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but go to the grocery store is still

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a bit of a shock sometimes.

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Right, it's those everyday expenses

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that really highlight this last mile issue.

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And Ocean Park points to a couple of things

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that are making it particularly sticky.

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Shelter and auto insurance.

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Oh yeah, I definitely noticed that.

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Yeah.

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My rent went up again and my car insurance

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is through the roof.

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Exactly, it's those kinds of things

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that are keeping inflation stubbornly high.

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So you've got this backdrop of sticky inflation

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and then you have the Federal Reserve

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trying to manage it all.

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Right, they've been raising interest rates

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to cool things down, but at what cost?

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Well, that's the tightrope they're walking.

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Raising rates too aggressively

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could really hurt the job market

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and slow down the economy.

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And it seems like the job market

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is already starting to show some cracks.

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You're right, Ocean Park's report mentions

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that the unemployment rate ticked up

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to 4.2% in November,

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and there's also been an increase in people

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filing for unemployment benefits.

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Over 1.9 million people are now collecting benefits,

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which is the highest we've seen since late 2021.

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So to help ease the pressure,

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the Fed actually lowered these interest rates

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back in September.

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But doesn't that kind of contradict their efforts

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to fight inflation?

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It does, they're in this really tricky situation.

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It's like a two-front war,

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battling inflation on one hand

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and a weakening job market on the other.

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And as if that wasn't enough to deal with,

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we also have the uncertainty

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of a new presidential administration and their policies.

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Exactly, new policies always bring

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a certain level of uncertainty.

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And Ocean Park points out that there could be some conflict

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between the government's spending plans

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and the Fed's efforts to control inflation.

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So you could have the government pushing the gas pedal

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while the Fed is pumping the brakes.

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It's a pretty good analogy.

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And here's where things get really interesting.

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Amidst all this uncertainty and potential conflict,

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the stock market seems to be living

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in its own little world of optimism.

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Yeah, I was just gonna say,

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it's almost like the stock market is completely ignoring

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all these potential problems.

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The S&P 500 is hitting record highs,

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it's a little baffling.

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Right, so how does Ocean Park explain this disconnect?

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Well, they point to two key factors.

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First, you've got the AI revolution.

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Advancements in artificial intelligence

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are transforming industries at an incredible pace

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and investors are betting big on its potential.

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Yeah, AI is definitely the hot topic these days.

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It seems like it's everywhere you look.

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And it's not just hype, there's real potential there.

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And then the second factor is the fact

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that both consumers and corporations

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are in a relatively healthy financial position.

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So people have savings companies are profitable

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and that overall financial stability

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is boosting confidence in the market.

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Exactly, but Ocean Park does caution

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that there might be risk hiding in plain sight.

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They're particularly concerned about

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how much growth is already priced into stocks.

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Ah, so you're talking about earnings expectations.

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What are analysts predicting for 2025?

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They're actually pretty bullish fact set estimates

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that earnings for the S&P 500 will grow

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by almost 15% in 2025.

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And that's on top of an estimated 9.4% increase for 2024.

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Wow, those are some impressive numbers.

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But there's gotta be a but coming right.

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Of course, there always is.

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The but is that this impressive growth

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might already be baked into current stock prices.

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The S&P 500 is currently trading

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at a pretty high price to earnings ratio.

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So if those earnings expectations aren't met,

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the market could be in for a big disappointment.

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Exactly, it's like setting the bar really high.

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If you don't clear it, you're gonna face plant.

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And to make matters even more complex,

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all of this is happening within a global landscape

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that has its own set of challenges.

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Okay, so let's zoom out a bit.

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What are some of the global risks

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that Ocean Park is worried about?

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They specifically mentioned two things,

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escalating geopolitical tensions and economic slowdowns

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in other parts of the world.

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Okay, so let's break those down a bit.

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Starting with geopolitical tensions.

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What kind of conflicts are we talking about here?

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Well, the tricky thing about geopolitical risks

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is that they can be really unpredictable.

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Things can erupt suddenly.

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Ocean Park's report doesn't get into specifics,

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but we know that ongoing conflicts, trade wars,

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political instability in various regions,

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all of these things can have ripple effects

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across the global economy.

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And those ripple effects eventually reach our shores.

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What about those economic slowdowns overseas?

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Are there any particular regions or countries

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that we should be worried about?

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Again, Ocean Park doesn't name specific countries,

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but they're probably referring to some broader trends.

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You know, Europe's been dealing with an energy crisis

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and slow growth.

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China's recovery hasn't been as smooth as some people hoped.

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And emerging markets always have their own unique challenges.

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So there are a lot of moving pieces on the global stage,

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which just adds another layer of complexity

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to the investment landscape.

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Absolutely.

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It's like trying to navigate a maze blindfolded.

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And this brings us back to a crucial question

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you raised earlier.

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If both stocks and bonds are facing potential headwinds

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in 2025, what does that mean for traditional investment

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strategies?

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It's the question that's been looming over this entire

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conversation.

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Traditionally, investors have relied on a mix of stocks

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and bonds to balance risk and return.

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But if both of those asset classes are looking shaky,

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what are investors supposed to do?

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That's where things get really interesting.

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It might be time for investors to start thinking

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outside the box and explore alternative strategies.

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OK.

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I'm intrigued.

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What kind of alternatives are we talking about here?

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Well, for starters, investors might

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want to look into alternative asset classes, things

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like real estate commodities, private equity,

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or even digital assets like cryptocurrencies.

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So basically, expanding your investment portfolio

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and not putting all your eggs in one basket.

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Exactly.

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But it's important to remember that each of these alternative

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investments comes with its own set of risks and considerations.

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So do your research understand the risks

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and maybe talk to a financial advisor

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before making any big moves?

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Great advice.

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So it seems like 2025 is shaping up

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to be a year that demands flexibility, adaptability,

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and a willingness to think differently.

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A year of potential pitfalls, but also exciting possibilities.

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Exactly.

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We need to be aware of the risks, but also

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open to exploring new opportunities.

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Well said.

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Thank you for walking us through this.

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It's been a really insightful conversation.

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It's been my pleasure.

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Remember, this is just the beginning.

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We'll be back to explore those global risks in more detail,

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and we'll also delve deeper into those alternative investment

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strategies.

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So stay tuned.

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So before we get into those global risks,

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I want to circle back to something we touched on earlier.

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Those earnings growth projections for 2025.

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Remember how Ocean Park highlighted those?

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Yeah, I remember.

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They were pretty impressive.

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They're expecting companies beyond those big tech giants

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to really step up in 2025.

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Exactly.

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They believe that the Magnificent 7, those dominant tech companies,

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might actually be sharing the spotlight a bit more this year.

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Oh, you mean like Apple, Microsoft, Amazon?

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Right.

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Google that crowd?

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Yep.

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Those guys, they're still expected to do well,

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but analysts are anticipating that a broader range of companies

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will be contributing to those earnings gains.

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Interesting.

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So it won't be just a tech-driven growth story anymore?

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That seems to be the trend.

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They're predicting that in 2024, the Magnificent 7

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saw earnings growth of like 33%, while the rest of the S&P 500

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companies only saw growth of about 4%.

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But for 2025, that gap is supposed to narrow significantly.

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Wow.

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That is a big shift.

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What's driving that change?

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It's probably a bunch of different factors.

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You know, some industries might be bouncing back

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from the pandemic.

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Others might be benefiting from new innovations

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or changing consumer preferences.

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And maybe some of those smaller companies

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are just more adaptable to the current economic climate.

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So if earnings growth is becoming more broad-based,

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does that mean the market is less risky?

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Well, it could mean that the market is a bit more resilient

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because we wouldn't be relying on just a handful of companies

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to drive gains.

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But remember that risk-hiding and plain sight we talked about.

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Right.

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If everyone is already expecting this widespread earnings

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growth, then they might be pushing stock prices up too high

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too soon.

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Exactly.

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The market might be getting ahead of itself.

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And if those high expectations aren't met,

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or if something unexpected happens,

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you know, like a sudden spike in inflation,

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or a geopolitical crisis, or even like a new COVID variant,

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well, the market could be vulnerable to a correction.

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So it's not all sunshine and rainbows.

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Even with this broader earnings growth,

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there's still a level of risk that we can't ignore.

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Absolutely.

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And that's why it's so important to have

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a solid investment strategy, one that carefully

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considers both the potential rewards and the risks.

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OK, so before we move on to those global risks,

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let's talk about what all this means for the average investor.

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Yeah.

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What are some things our listeners should

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be thinking about right now?

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Well, first of all, don't let the headlines freak you out.

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You know, it's easy to get caught up in the hype,

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whether it's about record-breaking market highs

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or doom and gloom economic forecasts.

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So stay calm and focus on the long term.

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Exactly.

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Investing is a marathon, not a sprint.

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And speaking of marathons, we still

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have a lot more to cover in this deep dive.

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We need to talk about those global risks

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that Ocean Park highlighted.

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And we also need to explore those alternative investment

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strategies we mentioned.

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All right, I'm ready for the next leg of the race.

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What should we tackle first?

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All right, so we've covered a lot of ground.

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We talked about inflation and interest rates

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and that tricky situation the Fed is in.

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And we talked about those surprisingly strong earnings

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projections.

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But we can't forget about those global risks

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that Ocean Park mentioned.

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Right.

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It's easy to get tunnel vision and focus on what's

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happening here in the US.

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But investing is a global game.

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What happens in other parts of the world

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can definitely impact our portfolios.

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So let's zoom out and take a look at the bigger picture.

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What are some of those global risks

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that Ocean Park is highlighting?

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They specifically mentioned two potential threats,

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escalating geopolitical tensions and economic slowdowns

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in other parts of the world.

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OK, let's break those down.

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Starting with geopolitical tensions,

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it feels like there's always some kind of conflict going

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on somewhere.

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What are we most concerned about right now?

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Well, that's the thing about geopolitical risks.

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They can be really unpredictable, and things

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can escalate quickly.

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Ocean Park's report doesn't get into specifics,

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but we have to think about things like ongoing conflicts,

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trade wars, political instability in various regions.

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All of these things can have ripple effects that

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impact the global economy.

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And those ripple effects can eventually reach our shores.

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What about those economic slowdowns?

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Are there any particular regions or countries

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that we should be worried about?

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Ocean Park doesn't name any specific countries,

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but they're probably referring to some broader trends.

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Europe's been dealing with an energy crisis,

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and their economic growth has been pretty sluggish.

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China's recovery from the pandemic

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hasn't been as smooth as some people expected,

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and emerging markets always seem to face

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their own unique set of challenges.

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But basically, there's a mix of good and bad news out there.

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Some economies are performing well

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while others are struggling.

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And I imagine all of this uncertainty

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makes it really difficult for investors to make decisions.

335
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Absolutely.

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There are so many factors to consider.

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It's like trying to solve a puzzle with half the pieces

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missing.

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And this brings us back to that big question

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we keep coming back to.

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If both stocks and D bonds are facing potential headwinds

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in 2025, what does that mean for those traditional investment

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strategies?

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The ones that rely on a mix of stocks and bonds

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to manage risk and return?

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Right.

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That's the question that's been hanging over our heads

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this entire episode.

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If both of those asset classes are looking a little shaky,

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where do investors turn?

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This is where things get really interesting.

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It might be time for investors to start thinking outside

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the box and exploring alternative strategies,

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or maybe even expanding their horizons

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beyond those traditional investments.

356
00:12:37,720 --> 00:12:39,240
OK, I'm all ears.

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What kind of alternative strategies

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are we talking about?

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Well, there are a lot of different options out there.

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For starters, investors might want

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to consider looking into alternative asset classes,

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things like real estate commodities, private equity,

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or even digital assets like cryptocurrencies.

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These types of investments don't always

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move in the same direction as stocks and bonds,

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so they can provide some diversification benefits

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and potentially help hedge against certain risks.

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So it's about diversifying your portfolio

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and not putting all your eggs in one basket.

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Exactly.

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But it's really important to remember

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that each of these alternative investments comes

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with its own unique set of risks.

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And things can get complicated pretty quickly.

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It's crucial to do your research and really understand

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what you're getting into before you jump in.

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And talking to a financial advisor is always a good idea.

378
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So as we wrap up this deep dive into Ocean Park's investment

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insights, what's the key takeaway for our listeners?

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What should they be thinking about

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as they navigate this complex investment landscape?

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I think the big takeaway here is that 2025

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is shaping up to be a year that's all about flexibility

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and adaptability and a willingness

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to think outside the box.

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It's a year of potential pitfalls, for sure.

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But it's also a year of exciting possibilities.

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We're facing some economic uncertainty,

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and there are definitely some geopolitical risks out there.

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But at the same time, we're seeing incredible advancements

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in technology and a potential shift in earnings growth

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that could create new opportunities.

393
00:14:04,200 --> 00:14:05,040
Exactly.

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00:14:05,040 --> 00:14:07,840
It's a time for both caution and optimism.

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We need to be aware of the risks, but also open

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to exploring new approaches.

397
00:14:11,480 --> 00:14:12,120
Well said.

398
00:14:12,120 --> 00:14:13,840
Thank you for guiding us through all of this.

399
00:14:13,840 --> 00:14:15,840
It's been an incredibly insightful conversation.

400
00:14:15,840 --> 00:14:16,840
My pleasure.

401
00:14:16,840 --> 00:14:19,960
And remember, this is just the beginning of your exploration.

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00:14:19,960 --> 00:14:22,880
Stay curious, stay informed, and most importantly,

403
00:14:22,880 --> 00:14:26,000
stay engaged with the ever-changing world of investing.

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00:14:26,000 --> 00:14:29,560
And on that note, we'll wrap up this episode of The Deep Dive.

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Thanks for joining us, and we'll catch you next time

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as we dive into another fascinating topic.