In 2025, a failed Santa Claus rally and negative first five days historically lead to a 2% return for the year, but these axioms don’t always hold, as seen in 2024.
2025 may see higher volatility, a potential 10-15% mid-year correction, and a year-end rally, resulting in an overall 8-10% return, disappointing after two consecutive 20% returns
Deportations and tariffs will disrupt labor force and production in agriculture and construction, leading to higher labor costs, reduced spending, and lower earnings in 2025.
The dollar remains strong due to US economic growth vs. other countries in recession, attracting reserves and investment capital.
S&P sectors are oversold, with basic materials and industrials underperforming, setting up a potential rotation into oversold areas like utilities and real estate.
Highly speculative stocks like ARK Innovation (down 80%) will likely get crushed, while fundamental quality companies with earnings and growth will survive.
Household equity ownership is at a record high, indicating the market may be near a peak rather than the bottom.
Market breadth is weak, and bear markets have three phases: a down leg, an up leg, and a wipeout phase.
Fear and greed are stronger than long-term resolve, with current conditions suggesting investors are greedy and fully allocated, typical at market peaks.
Earnings growth and fundamentals drive markets, and investors should focus on these factors rather than headlines, allowing logic to control their actions.
The NASDAQ 100, led by 5-10 heavily weighted stocks, has doubled the S&P 500 since the 2009 low, while the S&P 500 is front-end weighted and not representative of the broader market, with small caps showing vulnerability by double-topping at 2021 highs.
M2 money supply has grown 5 times more than any other 15-year period, causing artificially low interest rates for 15 years (10 at zero), leading to protracted errors in finances and a 15-year bull market up 5 times more than any prior bull market.
Insiders are selling stocks and Warren Buffett has his largest cash position ever, while the Fed has kept short-term rates near zero for 15 years, creating macroeconomic errors and setting the stage for a potential market collapse.
Gold and silver are positioned as safe havens for investors, with gold returning to all-time highs after underperforming from 2022-2024, indicating its potential during stock market downturns.
Gold miners are 120% up from their 2015 low, outperforming the S&P 500, but remain undervalued compared to gold and the broader market, representing a tiny sector with potential for growth.
The US economy shows signs of real economic distress, with job growth slowing in 2024 Q2 and the Philadelphia Fed revising 2024 Q2 job growth from +500K to 0.
The Federal Reserve’s rate cuts from 5.5% to 3.5% in 2022 signal an impending recession, mirroring patterns observed before past economic downturns.
Inflation is expected to stabilize around 3-3.9% in 2024 Q4, above the Fed’s 2% target, as the central bank prioritizes avoiding job losses over strict inflation control.
The 2030 census is likely to allocate more seats to Red states, potentially reshaping the electoral map, especially if a Republican occupies the White House.
The US is experiencing a crisis of state power, with various groups vying for control of an increasingly powerful government, likened to a “nuclear weapon” in terms of its influence.
Ukraine’s military faces low morale and mass desertions, while Russia’s infrastructure degradation campaign renders strategic attacks ineffective, suggesting a potential decline in Ukraine’s war effort.
Trump’s “escalation for negotiation” approach with Iran may yield different results in a potential second term, with figures like Tiffany Trump’s husband signaling interest in diplomatic engagement.
The US is viewed as an empire in decline, with a growing imbalance of power between the state and society, leading to calls for decentralization of state power to other social institutions.
The FBI has become partisan political hacks, fabricating lies like Russia-gate and working with CIA and MI6 to obtain FISA warrants against Trump officials.
FBI’s intelligence gathering has deviated from its intended purpose of collecting information based on reasonable suspicion of crime, instead focusing on political affiliation.
The FBI’s credibility is destroyed due to political corruption over the last 8 years, with even former agents expressing shock at the agency’s current state.
The US and Turkey have mutually incompatible interests in Syria, with the US backing Kurds while Turkey seeks to exterminate them, causing sectarian strife.
Israel’s military is ineffective on the ground despite bombing Gaza, relying on tunnel networks with Egypt for weapons smuggling.
The US has zero leverage in Ukraine and Iran, with the only option being to threaten nuclear war, highlighting the limitations of its foreign policy.
Iran possesses technological sophistication and has not sought conflict with the West, despite US actions like assassinating Iranian generals under Trump.
The UK and Germany face political instability, with the UK’s Labour Party in decline and Germany’s AfD lacking a ruling mandate, potentially leading to chaos and economic weakness.
The “Left-Wing Moment” in global politics is ending due to weak economic growth and record immigration, turning the masses against a socialist and globalist Elite they no longer trust.
Left-wing governments have been ousted in Italy, Netherlands, Sweden, and Finland, while populist movements are gaining ground in Germany, Britain, France, and Spain.
Post-COVID government expansion has led to economic stagnation, with the US at 2% real growth per capita, the Euro area at 0.5%, and Germany shrinking at nearly 1% per year per capita.
The Left’s open border policy has resulted in unrecognizable neighborhoods in cities like Amsterdam and Stockholm, with millions of unskilled or criminal migrants from countries chosen for their inability to assimilate.
The Left’s “progressive dominoes” are expected to continue falling in 2023-2025, starting with Canada and more of Europe, as their cultural and identity politics have left them with limited options to win elections.
Hayek’s “Prices and Production” (1933) explains the Austrian business cycle theory, where credit expansion leads to malinvestment in capital goods, causing a boom followed by a crisis when credit expansion stops and consumers revert to time preference spending patterns.
The structure of production is influenced by credit expansion, with consumer spending at the base affecting wholesalers, manufacturers, and miners through a ripple effect, rather than by consumers saving more.
Government support payments to unemployed workers during crises caused by credit expansion intensify the crisis by giving new money to people who then buy more goods, making the situation worse.
The Austrian perspective on business depressions, explained through Hayek’s diagrams, provides a more detailed and accurate view of the boom-bust cycle than mainstream circular flow diagrams.
In Hayek’s diagrams, circulating capital goods are produced in a 5-stage process, from raw labor and natural resources to finished consumer goods, with each stage spending $8 on the previous stage’s goods and hiring more labor and resources.
Consumer spending alone is insufficient to sustain production; capitalists must reinvest their gross income in gross investment to maintain the production process, even in a stable long-run equilibrium.
Government relief spending makes recessions worse by artificially lengthening the production structure through credit expansion, leading to an unsustainable structure that collapses when credit expansion stops, causing a depression.
The Hayekian Triangle diagram illustrates how a small volume of consumer spending can support a larger total of producer goods spending if there are more stages in the production structure, as the public’s time preferences don’t fall to match the artificially lengthened structure.
The economy faces a stagflationary risk with potential for inflation resurgence amid economic weakening, as indicated by record-high insider selling ratios suggesting corporate expectations of disappointment in 2024.
The Federal Reserve’s shift from dovish to hawkish forward guidance has unsettled markets, disrupting the 15-year pattern of “artful guidance” investors had grown accustomed to.
Gold and silver are in a bull market, with technical indicators suggesting a potential breakout despite short-term caution due to overbought conditions and lack of investor enthusiasm.
The oil and gas sector presents a contrarian opportunity, with demand projected to rise despite electrification narratives, and insider buying from notable investors like Warren Buffett (20% overweight allocation).
Extreme sentiment in the Commitment of Traders report, with managed money positions extremely long and commercial traders extremely short, indicates potential for a market reversal in the short term.
China represents an interesting contrarian opportunity due to extreme negative sentiment and low valuations, with potential risks from sanctions balanced against impacts on U.S. companies like Apple with Chinese production.
The S&P 500 experienced its worst year-end plunge since 1966 in December 2024, falling 4.4% amid fears of stagflation.
The US dollar had its best year in almost a decade in 2024, with expectations of becoming “chronically firm” during the transition from a great bubble to a great depression.
The yield curve inversion in the US, where short-term rates exceeded long-term rates, has historically preceded a recession, coinciding with the triggering of the Hindenburg Omen stock market indicator.
A diverse portfolio of 11 gold junior stocks tracked in December 2024 shows potential to outperform seniors and mid-cap stocks in the early stages of a long bull market for gold.
The reversal in the real price of copper since May 2024, from $520 to a declining trend, serves as a key benchmark indicating the transition from a great bubble to a great depression.
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