Market Musings: Addressing Year-End Trends and Consumer Credit Concerns
In this podcast, Motley Fool analyst Jason Moser and host Dylan Lewis cover several crucial topics:
- The impact of profit-taking and tax loss harvesting that led to a market slump as 2024 came to a close.
- How rising consumer credit card debt and delinquencies could influence discretionary spending into 2025.
- Alphabet‘s plans for the upcoming year: AI developments, Gemini, and Project Mariner.
- A few thoughtful resolutions to welcome the new year.
For full episodes of all The Motley Fool’s free podcasts, visit our podcast center. If you’re new to investing, explore our beginner’s guide to investing in stocks. A full transcript follows the video.
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This video was recorded on Dec. 30, 2024.
Dylan Lewis: Did the Grinch steal a rally? You’re listening to Motley Fool Money. I’m Dylan Lewis, and I have the pleasure of speaking with Motley Fool analyst Jason Moser. Jason, it’s great to have you here.
Jason Moser: Dylan, I’m glad to be here as we wrap up an eventful year and prepare for the next.
Dylan Lewis: We’re in that quieter week between Christmas and New Year’s where news tends to slow down. It’s a perfect moment to reflect on some stories and enjoy time with loved ones. How was your holiday?
Jason Moser: It was busy! We managed a packed schedule with birthdays, anniversaries, and the holidays all intertwined. We handled it well, and everyone seems pleased. How about you?
Dylan Lewis: I can’t complain either! I enjoyed family time and had a few holiday drinks. Now that I’m back home, I notice that the stock market seems to have a bit of a post-holiday slump. The S&P 500 is down about 2% since Christmas. Whatever happened to the Santa rally?
Jason Moser: Year-end selling isn’t unusual. Investment firms often take steps to clear out positions, and individual investors may also engage in tax loss harvesting. However, as we look ahead to 2025, uncertainties remain. A new administration is set to take charge on January 20th, and questions about their priorities and interest rate policies loom. It’s essential to remember that the market has performed remarkably well this past year, with the S&P seeing total returns of around 26% to 27% in 2024.
Dylan Lewis: As the year ends, did you make any adjustments to your investment portfolio?
Jason Moser: I typically don’t. I prefer not to react impulsively. I may make some sales for college tuition funds in the coming months, but my focus has been on opportunities to add to my investments. It’s all about nurturing the good investments while cleaning up the less promising ones, and thankfully, I don’t have too many weeds to pull.
Dylan Lewis: That sounds wise. My only change was increasing my 401K contributions due to the IRS increase, ensuring I’m maximizing my match. Besides that, I’m sticking to my strategy.
Jason Moser: Once you’re my age, Dylan, those catch-up opportunities become essential. Can’t complain about catching up.
Dylan Lewis: We’ll get there eventually. For listeners over 50, there’s still time to adjust contributions for the new year. Now, let’s turn to the issue of credit card debt. We’ve discussed this topic extensively. Increasing inflation and high-interest rates continue to strain American budgets, limiting discretionary spending. Do you believe this trend will continue in 2025?
Jason Moser: I have mixed feelings here. We seem to be witnessing a split economy. Higher-income groups appear to be doing well, while lower-income households are struggling significantly. Recently, the Financial Times reported that lenders wrote off $46,000,000,000 in seriously delinquent credit card balances in just the first nine months of the year, marking a 50% rise from the previous year. This figure represents debts that are over 90 days past due. Meanwhile, personal savings rates sit at around 4.5%, unchanged from last year—this figure is skewed towards higher earners. Notably, the bottom third of consumers have little to no savings, which raises substantial concerns for discretionary spending.
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Dylan Lewis: Observing the holiday data reveals that current consumer behaviors at stores in December and late November appear unaffected thus far. The National Retail Federation’s estimates indicate that holiday spending was nearly one trillion dollars, a new all-time high for the season. Additionally, a third of consumers reportedly took on debt during the holidays. However, much of the data for this analysis reflects trends from November and earlier, not capturing the peak spending that occurs in December. Jason, I’m concerned that this issue may worsen in the coming months.
Jason Moser: Your concerns are valid. It’s crucial to remember Americans often act irrationally when it comes to spending. If consumers are financially strained, they will create ways to continue spending due to the various financial tools available today, including not just credit cards but also the expanding buy now, pay later options that have emerged in recent years. When major banks like JPMorgan and Bank of America report earnings in January, their insights into seriously delinquent debt could provide a clearer picture of the future, especially considering that total credit card debt in the U.S. has surpassed an unprecedented $1.1 trillion. While high earners may manage this debt well, lower-income consumers are increasingly feeling the pinch.
Dylan Lewis: This idea of a divided consumer market stands out, with high earners generally thriving while lower-income groups face challenges. How do you envision this impacting retailers in 2025?
Jason Moser: This trend is certainly noteworthy. Discretionary spending is where we may see varied performances. For example, companies like Lululemon that cater to higher-income consumers may thrive, while others like Target and Walmart may face pressure as they navigate changing consumer behaviors. Reflecting on earnings calls will be crucial to gauge how retailers address current consumer conditions, especially as even affluent buyers are leaning toward more value-based shopping.
Dylan Lewis: This is a revealing look at consumer behavior as we approach 2025. It may not paint the rosiest picture, but it’s certainly a trend worth observing. In a related development, Alphabet has shared plans for the upcoming year. CEO Sundar Pichai recently discussed strategies amid rising AI developments and increasing antitrust scrutiny. Which topic do you want to explore first?
Jason Moser: I find the developments in AI particularly compelling. Antitrust issues may take longer to resolve, potentially mired in extensive litigation. We’ve observed a significant uptick in spending toward AI from various companies. As Alphabet focuses on 2025, they must demonstrate the benefits of AI to users. A primary concern is how evolving AI, such as large language models and chatbots, will impact their core advertising business. While some may fear that traditional search is nearing its end, I believe it’s merely evolving. Having grown up using encyclopedias, I can point to the drastic improvements from flipping thick pages to instant online searches. Google’s focus is now on integrating AI into their established ecosystem.
Dylan Lewis: It’s fascinating to see how generative AI could pose a significant challenge for Google, while also being met with multiple strategic responses. They are diversifying their approach to how information is accessed. AI overviews are now included in search results, and initiatives like the upcoming Gemini app highlight their push to compete directly with ChatGPT. Furthermore, their Project Mariner aims to offer an AI assistant within Chrome, enhancing user experience. This indicates they aren’t placing all their bets on one model but rather exploring various avenues based on user demand.
Jason Moser: Exactly. They view AI not just as a challenge but as an opportunity to enhance their platforms. While the functionality of Gemini resembles that of ChatGPT, Google is integrating this usability across more of their services, including Gmail and Google Drive. It’s essential to consider that the AI movement is not isolated to Google; every company is grappling with how to effectively implement AI to stay competitive.
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Investing in the Future: Insights on AI, Resolutions, and Stock Strategies for 2025
As companies like Google integrate artificial intelligence into their business models, the challenges they face are reminiscent of Facebook’s early struggles to adapt to mobile use. Just as Facebook had to pivot from a desktop-focused platform, many firms now must consider how best to leverage AI. However, this adaptability is not unique to Google, as the entire industry grapples with similar hurdles.
One of Google’s advantages is its wealth of platforms and an extensive user base. This allows them to experiment, learn, and adapt quickly. While some may worry that Google is not progressing effectively, it appears they are actively exploring various avenues and discarding those that don’t yield results. As a shareholder who has recommended Google stock, I maintain a positive outlook and intend to hold on to my shares. The company has diversified its revenue streams; ten years ago, over 90% of its income came from advertising. Today, that figure has decreased to about 75% as subscriptions and other services gain importance, potentially monetizing innovations like Gemini and good time.
Dylan Lewis: Jason, this is our last show of 2024, with only about 32 hours left before we welcome 2025. It’s the perfect moment to reflect on how we can improve in the new year. What are your resolutions?
Jason Moser: Are we focusing on personal growth or investment strategies? Hopefully both! Tim Hanson inspired me years ago with the idea of resolving not to sell any stocks. With that mindset, I hope to become more patient as an investor. Of course, I might need to make some sales to manage college expenses for my daughters, but that’s always been part of my financial strategy. Investing serves various purposes, and while I won’t strictly make that resolution this year, I want to minimize selling. Additionally, I plan to introduce three dividend-paying stocks into my portfolio this year. On a personal level, I tend to lean toward pessimism, so I’m aiming to approach each day with a positive attitude to positively affect those around me.
Dylan Lewis: You? A pessimist? I find that hard to believe.
Jason Moser: I know, it sounds surprising! Yet, I genuinely aim to wake up with a better mindset each day. A positive perspective can foster a more productive environment, benefiting myself and those around me.
Dylan Lewis: Your upbeat nature shines through on the show; I always feel uplifted when we record together. If 2025 brings more of that, I’m here for it.
Jason Moser: What about you? Any resolutions for this new year, whether personal or professional?
Dylan Lewis: I’ve found that setting clear systems works better than vague goals. For instance, instead of simply resolving to connect with family more, I plan to call a family member or friend once a week. This structured approach allows for better consistency. My goal this year is to create a solid daily routine to foster stability, which will help me remain positive and better engage with those around me.
Jason Moser: It certainly was easier to maintain daily structure when we worked in an office setting. When working from home, that routine can slip away.
Dylan Lewis: If any listeners have tips on establishing a daily rhythm, please email us at podcast@fool.com. We’re interested in hearing your resolutions too—whether they involve money or not. Thank you, Jason, for joining me for the last time in 2024.
Jason Moser: Thank you! Wishing everyone a Happy New Year. I appreciate your support and our listeners for tuning in.
Dylan Lewis: Just a reminder: the participants in this program may have positions in the stocks discussed, and the Motley Fool may have formal recommendations regarding them. Buyers should not act solely based on what they hear here. Our personal finance content follows Motley Fool standards and is not endorsed by advertisers. The Motley Fool recommends products we personally believe in, like the ones we recommend to friends. This is Dylan Lewis signing off for the final time in 2024. Thank you for listening. We’ll see you tomorrow.
JPMorgan Chase is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of Motley Fool Money. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Dylan Lewis has no position in any of the stocks mentioned. Jason Moser has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Bank of America, JPMorgan Chase, Lululemon Athletica, Meta Platforms, Target, and Walmart. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
