Our expert Luke Lango believes that a mix of pro-growth policies, low inflation, continued interest rate cuts, and advancements in AI will lead to significant stock market gains in 2025.
Among the factors Luke identified, “pro-growth policies” stand out as a vital strategy to combat a potential threat to your investment — reinflation.
Federal Reserve Concerns About Inflation Stalling
On Wednesday, Federal Reserve Governor Michelle Bowman expressed that inflation progress has “stalled in recent months” and “remains a concern.”
A glance at recent data supports her statement. In the last few months, core PCE inflation — the Fed’s preferred measure — has shown either little change or slight increases:
May: 0.1%
June: 0.2%
July: 0.2%
August: 0.2%
September: 0.3%.
The upcoming October data will be released next week.
In response to these conditions, the Fed is unlikely to raise interest rates now. We have entered a cycle of rate cuts, and any reversal — even a hint — could disrupt the economy.
The Key to Success Is Growth
To support struggling communities and lower high stock valuations through real earnings, the solution is clear:
We must pursue strong growth.
Specifically, we need to outpace inflation.
Former U.S. Treasury Secretary Larry Summers offered pointed advice for the future administration: We need to be able to build, baby, build in the United States.
As reported by MarketWatch, Summers emphasized the numerous hindrances to constructing data centers, energy facilities, and updated electricity systems essential for powering new technologies like AI and renewable energy.
He stated, “These are potentially complex and risky technologies, and the government needs to, less by law than by moral force, establish close connections with real experts monitoring developments” in the field.
Expectations for Trump’s Administration: Will He Deregulate?
According to Thomson Reuters, President-Elect Trump has the potential to influence various policy areas, including the economy and numerous regulatory rules.
The anticipated shift toward deregulation under Trump could significantly impact various sectors, including energy and finance.
As highlighted in the Digest earlier this week, a favorable scenario could see Trump’s tax cuts and deregulatory efforts boost demand for goods and services, leading to increased business investment and hiring, resulting in wage growth and higher overall productivity.
While prices may not decrease — and could potentially rise further — the growth in wages and opportunities might outweigh inflationary pressures, ultimately having a positive effect.
Thus, growth becomes the cornerstone of maintaining economic stability as we approach 2025.
The Dangers of High Stock Valuations
Without significant growth, we risk facing dangerously inflated stock valuations. For perspective, Thomas Yeung, a lead analyst for Investment Report, has pointed out:
[The result of the market surge] has led to increased average valuations — a point Eric and I have highlighted regularly.
The Shiller PE Ratio, which averages earnings over a decade, currently stands at 37.0, its highest since 2021.
When the Shiller PE Ratio hit this mark in December 2021, stocks fell 19% in the following year.
As I write this, the Shiller PE has actually risen to 37.95.
To put this in context, a historical chart from 1860 demonstrates how extreme this valuation is.
Source: Multpl.com
Will Trump’s pro-growth strategies kickstart an earnings boom that helps stabilize these inflated values? We will begin to get answers next year.
Failure to achieve this growth heightens the risk of market volatility — stocks may surge on positive news but could quickly decline on the negative.
This environment poses challenges for long-term investors but creates opportunities for traders.
Master Trader Jonathan Rose: Strategies for Volatility
Jonathan Rose, a leading analyst at Masters in Trading, has spent 25 years honing his expertise in both the Chicago trading floors and private investment firms. He now shares live market insights, trading ideas, and educational content daily.
This week, we introduced readers to Jonathan’s approach to utilizing short-term options, including zero-day options that expire the same day they are issued.
As outlined previously, these zero-day options can yield impressive returns, sometimes reaching quadruple-digit percentages swiftly. However, considerable stock movement is needed to make this happen — in other words, significant volatility is essential.
Jonathan believes that today’s market is primed for such opportunities:
I’ve been emphasizing that this short-term volatility isn’t going away. With market fluctuations remaining high, there are numerous ways to profit from the current conditions.
One potential opportunity on Jonathan’s radar involves the QQQ ETF, which tracks the Nasdaq 100 Index:
Pay attention to the daily chart below.
The $500 level is currently significant.
QQQ’s Key Support Level at $500: What Investors Should Watch For
After reaching a peak just above $515, QQQ has retraced, consistently finding support near the $500 mark.
This isn’t mere chance — it’s a battleground between buyers and sellers, making this a crucial level to monitor.
Why is this level important?
Such technical levels can serve as a launching pad for significant price movements.
If QQQ manages to stay above $500, we might see another upward push. Conversely, a drop below this mark could lead to considerable declines.
This scenario represents where potential opportunities exist, driving our interest in short-term options like 3DTE, 2DTE, and even 0DTE — allowing for quick responses to market changes.
If you’re new to these terms, “DTE” refers to “days to expiration,” bringing us back to those short-term option trades previously mentioned.
Join Jonathan for a Live Options Trading Session This Tuesday at 11 AM ET
During this live session, Jonathan will explain how zero-day and short-term options function. It promises to be an informative, one-time event.
Feeling uncertain about options? That’s understandable. They can seem daunting. However, I encourage you to attend so you can see firsthand why they have developed a bad reputation — and learn how they can effectively protect your investments and generate profits.
On the topic of profits, let’s revisit Jonathan’s analysis regarding QQQ:
We’ve seen this situation before.
Earlier this year, I pointed out a similar level in our live class. Members who prepared with short-term puts ahead of a market downturn benefited immensely when QQQ fell by 2.4%, resulting in gains as high as 179.9% overnight for our model portfolio.
This emphasizes the importance of preparation, discipline, and seizing the moment.
This Tuesday’s live session aims to equip you with knowledge on the workings of options, identifying market conditions that can lead to significant overnight returns, and managing risks effectively.
As we transition back to Jonathan:
A solid grasp of market fundamentals paired with a strategic approach to options and sound risk management is key to successful trading.
My experience on the trading floor has demonstrated that these principles, when applied consistently, can provide substantial benefits even in unpredictable markets.
Secure your spot for Jonathan’s One-Day Winners Live Summit this Tuesday at 11 AM Eastern by signing up here.
Looking Towards 2025: Growth as a Core Focus
Increased growth could alleviate both inflation and valuation issues in the markets.
If growth falls short, we might face a costly stock market, which could lead to significant volatility.
This underlines the need for understanding how Jonathan navigates challenging market conditions. We hope you will join him on Tuesday to learn how to turn market uncertainty to your advantage.
Wishing you a pleasant evening,
Jeff Remsburg
