Morning Brew Daily: Episode Summary
Title: 2025 Market Predictions: Tariff Impact, Crypto, Mega-Mergers and More
Host/Author: Morning Brew (Neal Freyman and Toby Howell)
Release Date: December 31, 2024
1. Introduction
On the final day of 2024, Neal Freyman and Toby Howell host a special holiday episode of Morning Brew Daily. The episode delves into comprehensive market predictions for 2025, featuring insights from investment expert Ann Berry. The discussion spans a variety of topics, including trade policies, the AI and cryptocurrency markets, Federal Reserve actions, and corporate leadership changes.
2. Tariff Impact and Trade Policies
Trump's Proposed Tariffs
The conversation kicks off with an analysis of the incoming administration's trade policies, particularly Donald Trump's aggressive tariff proposals. Trump has pledged to impose:
- 25% tariffs on Mexico and Canada, the US's two largest trading partners.
- 10% tariffs on China.
- Potential 25% tariffs across all goods entering the US, though details remain sparse.
Neal Freyman raises concerns about the economic shock these tariffs could cause, such as disrupting global supply chains and increasing consumer prices.
Ann Berry responds at [02:41] by noting, “We've just been going through all time high after all time high after all time highs. So I think people just really anticipate that at this moment in time and probably early in the new administration.” She suggests that investors expect some tariffs but not at the extreme levels envisioned by Trump. Berry references the previous tariff program's impact, estimating it at $200 to $400 per US household per year, which, while significant, wasn't catastrophic.
Sector-Specific Impacts
Toby Howell probes into which sectors might be most affected:
- Automotive: Heavy reliance on imports from Mexico and China.
- Agriculture: Imports of fruits, vegetables from Mexico, and meat and dairy from Canada.
- Electronics: Companies like Best Buy could see price increases due to high percentages of imported goods.
Ann Berry counters at [04:12], highlighting that while difficult, sectors like electronics may find opportunities in nearshoring and adjusting supply chains. For instance, Best Buy sources 60% of its products from China and 17.5% from Mexico, indicating potential vulnerability if tariffs materialize fully.
Market Response
Neal Freyman references historical data, noting that during the last Trump administration, market announcements of tariffs led to significant downturns, including an 11.5% drop on tariff announcement days. However, Ann Berry remains optimistic, believing that while some shocks may occur, they won't mirror the severity of past events.
3. BRICS Nations and US Dollar Hegemony
Shift Away from the US Dollar
Toby Howell introduces the topic of BRICS nations (Brazil, Russia, India, China, South Africa) potentially moving away from the US dollar, which could challenge its dominance in the global financial system.
Ann Berry responds at [06:36], emphasizing that despite the rhetoric, Trump is unlikely to allow the dollar's hegemony to weaken. She states, “Trump basically came out and said, any country that wave goodbye to America... have real influence... negotiation.” Berry suggests that robust negotiation tactics from the Trump administration will aim to maintain the dollar's strength.
4. AI Market and Nvidia
Nvidia's Growth and AI Market Dynamics
Toby Howell shifts the discussion to Nvidia, highlighting its impressive 180% stock increase in 2024, driven by its upcoming Blackwell chip promising a 25-fold performance increase. He queries whether Nvidia can sustain this momentum or face headwinds from regulatory scrutiny.
Ann Berry offers a nuanced view at [09:31], expressing skepticism about Nvidia becoming "twice the value of Apple." She believes in 2025, Nvidia will likely stabilize, contingent on successful chip manufacturing and the arrival of competitive technologies. Berry notes, “If competitive chips aren't materializing, I think Nvidia jumps up again because then it will become clear it's the only game in town for even longer.”
Broader Stock Market Implications
Discussing the broader market, Neal Freyman observes that while Nvidia and other “magnificent seven” tech stocks drove the first half of the year's gains, the second half saw diversification into sectors like utilities. Ann Berry agrees, suggesting that high dividend-yielding stocks might gain favor as interest rates influence investment appetites.
Mark Benioff of Salesforce is mentioned as a key voice in evaluating whether the AI market is in a bubble, with Berry recommending caution for companies that haven't yet demonstrated scalable AI applications.
5. Cryptocurrency Market
Bitcoin's Surge and Regulatory Environment
Toby Howell addresses the cryptocurrency market's explosive growth, citing Bitcoin's breach of the $100,000 mark and meme coins like Dogecoin surpassing Target in market cap. He attributes this surge to the perceived crypto-friendly stance of Trump's proposed SEC chair, Paul Atkins.
Ann Berry confesses at [17:07], “I have never bought crypto... 2025 is the year when people like me have to get over themselves and say, it's not going anywhere.” She emphasizes the necessity of embracing cryptocurrencies, predicting increased mainstream adoption and infrastructure development despite prior skepticism.
Investment Perspectives
Berry draws parallels between Bitcoin and gold as stores of value, acknowledging Bitcoin's finite supply as a key factor in its appeal. Neal Freyman warns of potential volatility, referencing the crypto winter where Bitcoin plunged 75% and significant legal repercussions for industry leaders.
6. Federal Reserve Policy
Interest Rate Cuts and Economic Impact
Turning to monetary policy, Neal Freyman discusses the Federal Reserve's (Fed) actions in 2024, including two interest rate cuts and an anticipated third. He highlights Jay Powell's (Fed Chair) efforts to achieve a soft landing by reducing inflation while maintaining a healthy job market.
Ann Berry provides her outlook at [21:23], expressing admiration for Powell's handling of challenging circumstances. However, she predicts that interest rates may remain higher for longer than expected, especially if Trump implements inflationary policies like corporate tax cuts or if tariffs don't adjust as anticipated.
Downstream Effects
Toby Howell inquires about the broader consequences of sustained high interest rates:
- Real Estate: Higher mortgage rates hinder home sales and affordability, impacting wealth creation avenues.
- Consumer Sentiment: Increased borrowing costs and potential consumer struggles, as discussed with the CEO of Upstart.
Ann Berry adds at [24:29] that lower yields on cash accounts and money market funds will drive investors towards high dividend-yielding stocks, emphasizing the strategic shift from cash to equities that offer both appreciation potential and dividend income.
7. Activist Investors and CEO Changes
Influence of Activist Investors
Neal Freyman brings up the wave of CEO changes in major corporations like Boeing, Starbucks, Nike, and Red Lobster, attributing these shifts to activist investors. Ann Berry explains at [26:21] that funds like Elliott Management and Bill Ackman's entities target underperforming or mismanaged companies, pushing for strategic changes to enhance shareholder value.
Starbucks' New Leadership
Focusing on Starbucks, Berry praises the appointment of their new CEO, Brian Nicholl, a former Chipotle CEO. She emphasizes the importance of execution, detailing how Nicholl's hands-on approach—such as visiting stores to assess operations—can drive meaningful improvements. Berry remarks, “Execution really is the key to driving performance... pay attention to the user experience.”
8. Rapid-Fire Predictions
In the final segment, Ann Berry participates in rapid-fire questions, providing swift insights on various topics:
- Companies Going Public: Predicts Klarna, a buy-now-pay-later giant, as the first private company to go public in 2025.
- Google Breakup: Doubts the likelihood of Google being dismantled despite ongoing DOJ pressures, citing Google's innovative edge with AI advancements.
- TikTok Ban: Believes TikTok will not be banned but anticipates battles for ownership among US authorities.
- Unexpected Mergers: Suggests consolidation among direct-to-consumer brands like Rent the Runway, Revolve, and Stitch Fix as a likely merger scenario.
- Favorite Ticker Symbol: Expresses a fondness for Spotify’s ticker SPOT due to its aesthetic appeal and meaningfulness.
Berry also shares her recommended approach to investing, likening it to analyzing literature—emphasizing the importance of judgment and justification in investment decisions.
9. Conclusion
As the episode wraps up, Neal Freyman and Toby Howell encourage listeners to follow Morning Brew Daily on social media and subscribe to their newsletter for additional insights and daily news. Ann Berry bids farewell with well wishes for the New Year.
Notable Quotes:
- Ann Berry [02:41]: “We've just been going through all time high after all time high after all time highs. So I think people just really anticipate that at this moment in time and probably early in the new administration.”
- Neal Freyman [05:24]: “If you're saying now that the markets aren't pricing in the tariffs materialize, then we could be in for some shocks.”
- Ann Berry [09:38]: “I do not think it's going to be twice the value of Apple.”
- Ann Berry [17:07]: “I have never bought crypto... 2025 is the year when people like me have to get over themselves and say, it's not going anywhere.”
- Ann Berry [26:21]: “Execution really is the key to driving performance... pay attention to the user experience.”
This episode of Morning Brew Daily offers a thorough examination of the factors that will likely shape the financial landscape in 2025. From trade policies and technological advancements to monetary policies and corporate governance, listeners gain valuable perspectives to navigate the upcoming year’s economic challenges and opportunities.