2025 Market Predictions: Tariff Impact, Crypto, Mega-Mergers and More

Summary

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

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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.

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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.

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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.

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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.

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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.

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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.

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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.”

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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.

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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.

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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.”

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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.

Transcript

[Google Gemini]

This episode is brought to you by Google Gemini. With the Gemini app, you can talk live and have a real time conversation with an AI assistant. It's great for all kinds of things like if you want to practice for an upcoming interview, ask for advice on things to do in a new city, or brainstorm creative ideas. And by the way, this script was actually read by Gemini. Download the Gemini app for iOS and Android today. Must be 18 to use Gemini Live.

[Neal Freyman]

Good morning Brew Daily Show. I'm Neal Freyman.

[Toby Howell]

And I'm Toby Howell.

[Neal Freyman]

Today, what does 2025 hold for the stock market?

[Toby Howell]

We broke it down with investing expert Ann berry. It's Tuesday, December 31st. Let's ride.

[Neal Freyman]

Holy cow, it's the last day of the year. What a ride it has been. Toby Favorite memory from 2024.

[Toby Howell]

Wow. Favorite memory from 2024. It's got to be that three wood I hit on 18265 uphill carry. No, I'm just kidding. Probably it is related to the podcast. Seeing Spotify Wrapped come out recently, that was a highlight. Doing the in person trivia night we hosted in New York, that was a highlight. Too many to choose from. So I'm just going to say my favorite memory is doing the podcast every day with you.

[Neal Freyman]

To wrap up the year, we are continuing our special holiday episodes with a show all about markets. The stock market had a bangin year in 2024, but what should you be looking out for in 2025?

[Toby Howell]

To help, we had a chat with the Incredible and Barry, the host of the Bruce Markets Focus podcast after earnings and LinkedIn is like reading what your parents thought your employment history would end up looking like. She's been a CEO, founder, broadcaster on TV channels like Bloomberg, invested billions of dollars as a private equity dealmaker, and we're grateful to have her on the show, which we taped in mid December.

[Neal Freyman]

Okay, and thanks so much for joining us.

[Ann Berry]

I'm ready to dig in guys. This is going to be exciting.

[Neal Freyman]

2025 and we are about to dig in right now. One of the biggest themes for markets in 2025 is going to be the policies of the incoming administration, particularly Trump's signature policy proposal to enact sweeping tariffs. Just to recap for everyone, Trump has pledged on day one that he'll impose 25% tariffs on Mexico and Canada, the US two largest trading partners, and an additional 10% tariffs on China. On the campaign trial, he also mentioned slapping across the board tariffs on percent on all goods coming into the U.S. but we haven't really heard any more details on that. And tariffs of this scale would provide a major shock to the economy, upending global supply chains and likely raising consumer prices for Americans. How do we think about the stock market's response to Trump's ultra aggressive trade posturing?

[Ann Berry]

I think we've already seen the stock market response, right, because you originally when he came out, he said I'm going to slap 60 to 100% tariffs across the board in China. And guess what? The market did. Well, 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. This is Trump posturing. He's throwing the maximum possible punitive policy out there. And then he's doing things like he's been doing in Mexico. He's gone over there and said, okay, what are you going to do for me on immigration guys? I bet he's going to go to Europe and say what are you going to do on NATO spending guys? And hey, China, what are you going to do on cybersecurity and privacy? So I think this is negotiation. We need to see what really shakes up.

[Neal Freyman]

So you're, so you're saying investors are expecting the tariffs to not materialize?

[Ann Berry]

I think that they're expecting some tariffs to materialize. I just don't think they expect to see it at the scale that that's being thrown out there right now. And actually I went back, I nerded out on this because I just love to net out on this stuff. I went back to see what happened under the last tariff program. Came to around 2 to $400 impact per US household per year, which is not nothing that's meaningful. But it wasn't, you know, as catastrophic as people thought. So people are saying we'll be okay.

[Toby Howell]

Let's dive into some of the sectors though that could be most affected sector the economy, like the auto market. A lot of auto imports come from Mexico and China. Same thing with fruits and vegetables. A lot of imports come from Mexico. Meat and dairy coming in from Canada as well. I guess my follow up though is are there any specific investment opportunities that actually might arise as a result of these policy, policy changes rather than just sectors that could be impacted by the tariffs?

[Ann Berry]

Well, when it comes to fruit and dairy and food, I think that's a little bit tougher. I think it's hard to see opportunity there. And I think you just say, okay, we need to see how this shakes out. This could be tough to go back to the policy thing, that's really interesting though, that the agricultural community actually supported the tariffs, you remember at the beginning last go around. So, you know, even despite the economic pain, it's unclear what the reaction is going to be when it comes to auto. But also, Toby, let's talk about electronics more broadly. We've actually seen these public company CEOs come out and already say we're doing two things. We're starting to accelerate our imports from these nations before Trump comes into office. And we are looking at near shoring. But we've done it before and we did it last time. So we're better prepared this time. I think we're okay.

[Neal Freyman]

But during the last, if these, if these tariffs were to materialize, I mean, it could have an impact on the market. I mean, I just went back to, I went back, went back to the last Trump administration as well. And on the days that tariffs were announced, I remember this very clearly because I was writing the morning for a newsletter at the time. The markets would absolutely tank. They fell 11.5% on days when the tariffs were announced during his first term. So if you're saying now that the markets aren't pricing in the tariffs materializ, then we could be in for some.

[Ann Berry]

Shocks, we could be in for some shots, but I don't think they're going to be of the scale that we had. So let's go back to that moment when you were seeing the reaction for the newsletter, Neal. A lot of the companies that were impacted, well, what did they go and do? Right, they move their supply chains to Vietnam. They move some of their supply chains back over. They onshore it again. They brought it back to the US So definitely ask about Best Buy, for example. Best Buy, which had its own issues. A CEO setting the earnings call like electronics prices will definitely go up. 60% of Best Buy products in terms of cost of goods sold come from China, by the way, 25% of U.S. electronics imports from China, 17 and a half percent from Mexico. So yes, if it materializes, it's going to have an impact, but I don't think it's going to be the 11% drop that you just mentioned.

[Toby Howell]

Let's just broaden the scope here a little bit and talk about BRICS nations, which are those nations that include Brazil and Russia. They've expressed some interest in actually potentially moving away from the US Dollar, which caused Trump to float this idea of levying tariffs against those nations as well. Do you see these tariff wars having some downstream effects, like potentially this pushback against the US Dollars, like hegemony over the global financial system. Like, are you thinking that widespread about the potential impacts from Trump's, like, you know, tariff war?

[Ann Berry]

Okay, so let's see what Trump said in response. I've got this little print out here because I saw this too, when the BRICS nations came out and said, you know, perhaps we'll start looking at a different anchor currency other than the dollar, which is a sort of derivative effect, Toby, of what you're saying. Trump basically came out and said, any country that wave goodbye to America. Right. So I think it's pretty clear that even if we do go down the tariff route, I don't think we're going to try and reach a point where we have this very, very weak dollar as a result. And look at who Trump wants to appoint, right, as Treasury Secretary and his Commerce Secretary. You know, these are folks, they're Wall street guys. They don't want to see mass tariffs coming and they want to see negotiation, I think.

[Toby Howell]

Yeah. And then finally, just looking specifically at the markets again, are there some companies that you think have navigated this period before the Trump administration particularly well? One company that comes to mind is Walmart. They say two thirds of their items are made in the US Versus maybe a company like Target that is a little bit more exposed to a importing goods from Mexico in China, etc. Is there any names that you're kind of looking at to say, okay, these, they have their ducks in a row here. They think they're going to weather this storm pretty well?

[Ann Berry]

I think all of them have lived through this before, you know, and I'm not trying to dodge the question, is that one versus another, they literally have lived through this before. And let's look what happened, right? They lived through the last Trump administration. The tariffs came in, people either adjusted their supply chains or they adjusted their prices. Right. That's number one. Number two, it's not like the Biden administration came in and then abolished all those tariffs. Do you remember there was tacit agreement across the aisle. There were crickets. There was a little bit of, you know, a reaction when the chariots came in. But once they were in and they were in effect, there were crickets. You know, there was tacit agreement that, yeah, we need to get tough on China, we need to get tough. This is what we need to do. They weren't reversed, which means we've been living with it. So the question is what the incremental amount do. And I just think the incremental amount just means that we just incrementally get more from the places that we moved our supply chains to.

[Toby Howell]

Let's move on to our next category. So every year there's this bank called Saxo bank that releases this annual list it calls outrageous predictions where it picks a few events that while unlikely, could potentially happen. One of those predictions is that Nvidia will balloon to twice the value of Apple in 2025. Some of the rationale behind that prediction, Nvidia has this next gen Blackwell chip in the pipeline that represents this 25 fold increase in performance compared to its existing lineup. There also seems to be no signs that the air arms race going on in big tech is slowing down. Companies like Metta, Google, openair are all vying against each other for these all important Nvidia chips. Those tailwinds have turned Nvidia into this bell of the stock market ball. It's up over 180% in 2024. But and I'm curious to get your thoughts, is Nvidia going to continue to capture more of this AI market or are some of the headwinds maybe regulatory scrutiny going to slow it down as we enter 2025?

[Ann Berry]

First of all, how excited are you guys for the watch parties, the Nvidia earnings watch parties coming out next year?

[Neal Freyman]

I just wish we had the idea.

[Ann Berry]

Yeah, right.

[Neal Freyman]

So, so Nvidia earnings have become this blockbuster event on par with Fed interest rate decisions and jobs reports. Kind of out of nowhere that people were hosting literal watch New York City bars for its third quarter earnings reports. I do wonder whether those. Well, maybe we've reached peak Nvidia earnings as sort of those year on year comps get a little more reasonable and you don't see things like this $3 trillion company is growing at 300% anymore. But it was a really fun time this year.

[Ann Berry]

Well, we've got to host some. I feel we do see a host party live streams in our future. So let's, let's. What happened with respect to Blackwell and Nvidia this year? Right. The promise of black. You just said it Toby. Like unbelievable capacity, this speed of processing and also slight, more energy efficient which is, which is good news for everybody. And so the promise of it has been out there and finally 2025 is when it, when it ships, right, the volume comes out, it gets real. So my, my thinking is the following. Nvidia has blown past expectations in most of the earnings releases with the exception of the last one when it hit expectations and there was this muted response which is absurd, right, because the outlook was fantastic. And they were like punished for just being really good students. Well, I think what's going to happen in 2025 is there's going to be this reversion to the sort of forward looking statements of Nvidia because Blackwell actually ships. Don't forget, Nvidia does not manufacture its chips. Right. Which means whatever happens in 2025 is related to two things. One, making sure that their manufacturing partners are getting the stuff out on time and to their clients on time. And there have been delays. As long as that happens on time, I think Nvidia continues to be stable. So what causes Nvidia to pop? Well, they need another generation of a chip or they need to say we're going to accelerate our production and this is how we're going to do it because we're going to change our manufacturing. I don't know how they're going to do that, to be perfectly honest. So I don't know that we're going to see the same explosion in Nvidia where I do see a concern. And by the way, I don't think they're going to be twice the value of Apple. For what it's worth, I do think that we're going to start seeing in 2025 all of this talk about competitive chips either materializing or not. And if it's not, I think Nvidia jumps up again because then it will become clear it's the only game in town for even longer.

[Neal Freyman]

How do you think about Nvidia in relation to the broader stock market? I mean for the first half of the year I dominated and most of The S&P 500 gains came from Nvidia and just a couple of the other magnificent seven. Towards the second half of the year the stock market seems to have broadened out and things like utilities and other sectors are growing faster than the tech sector. Do you see that as a good thing and maybe a way for this market and to be in a bubble like, like the dot com version of it? So two decades ago?

[Ann Berry]

Yeah, well that's a great question. So let's write utilities there are and sectors like utilities. So utilities historically have yielded dividends. Right. So when you've been in an environment where you've had really high interest rates and it's almost as effective for you to go take your cash, put it in a high yield savings account, keep it in the bank, money has tended to go there with interest rates coming down. I do think, Neil, that the dividend yielding stocks are going to become slightly more favorable. Things like utilities being one of them. Also, people are saying, oh, great energy to regul because we've got Trump coming in. That's probably going to be good for utilities, too. I think broadening out is going to really depend on a couple of things. I'm not sure it's going to be broadening out necessarily by sector, but I do think it's going to be broadening out by winners and losers within sectors. For example, all these folks have been talking about investing in AI and the promise that it's going to bring greater productivity. I think everyone in 2025 is like, great, now show us the money. Where is it? Where are the results? And if you don't have them, I think you start to see those share prices start to go down. But if you're actually delivering in the way that Salesforce is, to pick a name out of the blue, I think that continues to pop.

[Toby Howell]

That's a perfect segue into my next question. Actually, you recently interviewed Salesforce CEO Mark Benioff and you got his take on AI and you really straight up asked him, do you think the AI market is currently in a bubble right now? Take us through what he had to say as the CEO of Salesforce, as a CEO of a company that is betting a lot on AI.

[Ann Berry]

But what was fascinating is he broke it down into two different buckets. So he said, let's start with the private market. And so like lurking inside Salesforce, by the way, also lurking inside Nvidia are these big venture capital firms because these big corporations are investing into startups where they have real visibility into how those startups could function. And Mark said, look, Salesforce has got about $5 billion under management right now inside startups, and we're seeing some really great activity in the AI space. People are really breaking the mold. There's real innovation. He also called out companies like inflections that there was no there there. And when there's no there, the, you know, the emperor's going to have no clothes and the market's going to start calling it out. So I think he said there has been a bubble in certain applications of an AI. He said he didn't name names in the public market. He did said that there are some now where the fundamentals are not proving out in the public companies. I happen to agree with him, but I don't know that it's until maybe the middle of 2025 when we start really seeing who's been bluffing. Not with mal intent, with hope as a strategy and hope is not a strategy. And I think we start seeing that come to fruition next year.

[Neal Freyman]

Do you? Just to put you on the spot, are there any particular names that you think are bluffing or have maybe been talking a big AI game and will not be able to prove it out next year?

[Ann Berry]

Oh, I've been so wrong on this. I'll give you where I've been really wrong. So I thought for the longest time and Alex Karp, if you're listening to this, please come, come onto the show and talk to me about it. For the longest time I thought Palantir, I know it's a consulting business and it talks about AI, but it's not a software company. Why does it trade where it's done? It's that share price, guys, this year you've seen it, right?

[Neal Freyman]

Top five performer.

[Ann Berry]

In the top five performer. I'm still not 100% clear on the exact repeatable use of AI, so I'd like to see more evidence that. But that's what I got it completely wrong. Like I thought that was hopes of strategy. And Alex Cobb, again, if you're listening, come. It has proven me sort of wrong. I do think that there are other companies where they've talked vaguely about AI as something that is going to be really important to them, but we haven't yet seen it being adopted at scale. So let's take for example, in the manufacturing side, I've been this really big believer that whether it's medical devices or it's in farming equipment, we're going to see what's been going on with consumer electronics where the next generation of combine harvesters, the next generation of scanning machines in hospitals are going to have more AI capabilities. I think that's coming. I think it has to come. I'm just not sure what the timing is going to be.

[Toby Howell]

And it's totally okay. Last year there was something called the inverse Toby index where everything I predicted that was going to happen. The next year the reverse ended up happening.

[Ann Berry]

Oh, wow.

[Toby Howell]

I'm right there with you.

[Ann Berry]

We need to get you your own etf.

[Toby Howell]

I know the inverse. Tell me the inverse. Jim Cramer People make a lot of money or lose a lot. So another hotter than hot sector this past year has been crypto. The price of bitcoin finally broke through that vaunted $100,000 barrier, which also propelled it to become the best perform asset of the last decade. Meme coins are still all the rage right now with Dogecoin carrying a higher market cap than Target. Can't believe that's a real sentence. Part of the reason behind all this frothiness and the record highs is this perception that the incoming Trump administration, particularly his pick for the chair of the sec, Paul Atkins, are much more crypto friendly than past administrations. Do you see crypto carrying all this momentum into 2025 and beyond, or is it going to get maybe a rude awakening?

[Ann Berry]

Okay, Since. Since we're in confessional territory, I feel I have a confession.

[Neal Freyman]

Safe space.

[Ann Berry]

It's a safe, private space. No one's listening. I have never bought crypto, okay, for lots of reasons. I'm happy to go into another time, but I've never bought crypto. And I've looked at the adoption and said, okay, it's getting more mainstream. It's getting more mainstream, it's getting more mainstream. I do think 2025 is the year when people like me have to get over themselves and say, it's not going anywhere. Figure out how you're going to ride the wave. The wave doesn't necessarily need to have the same momentum that we've seen over the last couple of weeks. You're right. I think it feels like there's a sea change. Like Gary Gensler, who's the current head of the sec, has been vehemently anti crypto. That's going to change probably. With Paul Atkins coming into the seat. We've got David Sachs being appointed as a sort of unofficial AI and crypto star. Right. You've got Elon. Don't get me started on meme coins. But, like, he clearly is a very influential, powerful voice in the next administration. He's all for it. So. So I do think now looking for legitimate ways to get around the infrastructure of this. And I was actually, I was book launch party of a friend of mine, Anthony Scaramucci, who's been a bitcoin evangelist for a long time. And Michael Saylor was there talking about. There's this mic drop moment where he said, I invested 25 million bucks in bitcoin and whatever it was, and now it's like billions of dollars worth of value. So I think looking at companies like MicroStrategy, looking at companies like Coinbase, not investment advice, but I think finding legitimate players around the infrastructure, I think we're going to have to do it. I'm going to have to do it. I don't want to.

[Neal Freyman]

If I was thinking about investing in crypto, you know, why would I? Is it just because I think the price is going to go up because you say there's more mainstream adoption? There's been ETFs from from like the most institutional of institutional investors like BlackRock. We still haven't found any real proper use case for bitcoin. Maybe some other, some other crypto does have some applications, but for bitcoin itself, it just seems like it is a store of value, very similar to gold where people will just buy into it because they think that other people will buy into it in perpetuity.

[Ann Berry]

That seems to be the case. Right. That's. I did go back back to my point on adding. I did go and read the Satoshi white paper. I did. And that's exactly it. It's a store of value. There's a finite amount, some people would argue more finite in terms of discoverability than gold. And, and if you have something that rare and finite, a known amount, then that's what they're using it for.

[Neal Freyman]

I think it's just worth reminding people that there was a crypto winter two years ago where the price of Bitcoin plunged 75%. The head of a crypto exchange $10 billion and is now serving a 25 year sentence. So we'll see what happens in the next few years with bitcoin and don't go anywhere.

[Toby Howell]

We'll be right back after this break.

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A free professional measure during the blinds.com year end blowout. Rules and restrictions may apply.

[Neal Freyman]

Let's turn to the Federal Reserve, which may have a bigger impact on markets and the economy than anything we've talked about so far. As of this taping in mid December, the Fed has cut interest rates two times this year and is expected to slash rates one more time at its next meeting later this month. Sure seems like Jay Powell has nailed the mythical soft landing. Inflation has returned to just about normal levels while the job market has remained healthy. Meanwhile, there appears to be some stability at the top after Trump said he wouldn't try to remove Powell, with whom he's had some beef before. And what can we expect from the Fed this year?

[Ann Berry]

I think we see gentle cuts, but I think we see Jay Powell. I'm a big fan of Jay Powell, by the way. I do think he stuck the landing under really difficult circumstances. I think we see him trying in the next three to six months to very carefully and cautiously feel out what fiscal policy is going to look like. My gut, and I could be wrong, I've been wrong many times, is that we're going to see interest rates remain higher than expected for longer than expected for the following reason. If Trump goes ahead and drops corporate tax rates, you know he wants sort of 15% blanket rate, that is an inflationary action. Okay. If we have tariffs and there isn't as rapid an adjustment as we think, I think we'll be okay. But if there isn't, that is an inflationary policy. Yes, we're going to have Doge trying to look at cost cutting, but if we don't get there in time, we've got inflationary forces at work and possibly quite quickly. And I think if you're Jay Powell now, you've still got to hit that 2% inflation target. That's your job. So I don't see in that scenario how he's able to cut rates as quickly as we thought he might do.

[Toby Howell]

So what are some downstream effects? Take our listeners through some downstream effects. If we do actually enter next year in the years falling with higher for longer interest rates, what might happen or what are some effects that will broaden out from that?

[Ann Berry]

Well, let's talk about mortgages. Let's talk about real estate. Everyone's been talking about how difficult it is for people to if they're already a homeowner, if they've already got that privilege. It's been really hard to say I'm going to sell my home lose as a result my juicy 30 year mortgage that I looked down four years ago, it really attractive interest rates earlier and try and now get a 6% mortgage. That which is just crippling in terms of the math on covering your costs. So if we're stuck with interest rates higher for longer, I think you've got people without the ability to change homes or, you know, for our audience to go buy their first home. Right. And to get on the property ladder, which has been this huge source of wealth creation for our parents generation, our grandparents generation. So I think that's probably problem number one. Problem number two is I think there's a ton of noise around the real estate of the consumer right now. So on our sister podcast, After Earnings, I spoke to the CEO of Upstart a couple of months ago. And upstart is this digital lending platform that's trying to find new and creative AI driven ways to figure out how credit worthy you are. Not just the FICO school, but actually what is your jobs, what's your trajectory? And it's very interesting. They've done a bunch of analysis around what's, what's truly the state of the consumer when you look at default rates, what is not known about buy now, pay later and how much money people are borrowing using that kind of mechanism. And he said, look, the data is not as brilliant as we all think. Sentiment feels pretty good, but the consumers, some of them are really struggling.

[Toby Howell]

Part of one thing that you mentioned earlier too is that falling rates mean that cash accounts or like money market funds are not going to be as popular because they used to be yielding five and a half percent. Now that's creeping downwards. Every day we get like an email saying like, oh, your yield is going down. What do you think some of the effects are from that? Who are maybe some winners and losers of those yields being a little less juicy?

[Ann Berry]

I think it goes back to looking at those stocks that are creating quite attractive dividend yields. So the attraction of dividend yielding stocks, and I've been a fan of them, and by the way, again, not investment advice, but I've gone into a bunch of ETFs because you don't have to do the work on every stock and you, you can get high dividend yielding ones. You've got the upside potential, right? It's potential appreciation while still getting some dividends. In the meantime, if you shove your cash into a money market account, you're not going to get the upside appreciation. You're just going to kind of clip the coupons and hope that that's sort of good relative to everything else you could have done. So I think you continue to see that shift. I, I do also think back to the conversation we had earlier. Let's talk about tech companies again and let's talk about what drives their share prices. If you go back in history, the lower share prices, the Lower interest rates have been, the more people have been willing to take a risk on speculative technologies, on innovation. And that's part of the reason why some of these tech companies did so well, because people are willing to say they don't create cash. Now in some cases the opportunity cost of me putting my money into these stocks is relatively low. The problem is when you've got rates that are still high, your appetite for risk relative to that isn't, isn't as high as it would be. Which I think increases the pressure back to what are we going to see in 2025 for these companies? Promising AI, for promising innovation, for promising margin, promising cash? Toby, you're going to be sitting there going, all right, show me the money guys, I'm going to or why aren't I having my money in the money market account still?

[Neal Freyman]

So this is the last day of 2024 and I think I will remember this year as the one went Long time American corporate titans were brought to their knees. Boeing, Starbucks, Nike, intel, will even throw in Red Lobster. All struggled mightily and either replaced or are in the process of replacing their CEOs. And is there a company out of the group that I mentioned that you think has an easier turn a to.

[Ann Berry]

A turnaround amongst all of those? Yeah, I think Starbucks got a shock because they hired a really fantastic CEO in the form of the former Chipotle CEO. But you've touched on something, Neil, that you framed it as 2024 was like the year of the CEO change. Can I frame it a little bit differently? I think it was the year that activists shaped some of the biggest stories in the market. Starbucks bucks change forced by an activist. Nike change forced by an activist. Boeing was different. There was a real crisis there.

[Toby Howell]

And define what you mean by activists in this context.

[Ann Berry]

Right, so you've got these big funds that have pots and pots of money. Folks like Bill Ackman, Nelson Peltz, funds like Elliot Management. And the specific mandate of these funds, Toby, is they look at companies that are in the public domain and they say, okay, what is the management team like? Are they doing their job to find us? Are they finding growth opportunities? Are they finding cost reduction opportunities? They look at the strateg and say how are these companies doing relative to their competitors? Do they have the right product lines? Are they too diversified? Are they not diversified enough? And what these activists do is they go out, they build positions, they buy the shares of these companies large enough that they start to have real influence. They write often very articulate, sharply worded letters and often they'll reach the point where they say, look, we're going to put a presentation out there and we're going to say to you, management team, here's a bunch of things we think you should do differently. Please go do them. And if you don't, we're going to start shaking our say, rattling our sabers and shaking up your board. Southwest Airlines, right, Another one. We saw this. The CEO survived. I think he's on borrowed time, for what it's worth. But the board changed out. So that's what the activists do. Some mixed feelings about them. I've got a very specific view on them.

[Toby Howell]

So one person you did mention is the new CEO of Starbucks, which is Brian Nicholl. He's been described by some analysts as the LeBron James, the Tom Brady of the restaurant industry. Do you think that he has the ability to steer Starbucks in the right direction? Because Starbucks is facing a lot of headwinds, slowing growth in China. Pretty poor store experience right now. But how much can one executive or one CEO really change the fortunes of a company? Or is it more just like the structural issues are going to be what they are and they can only do so much?

[Ann Berry]

So I'm going to give you a little bit of context. My answer. I've been a CEO of a company. There were 6,000 people, and I've sort of said this over and over again. Execution really is the key to driving performance. There's lots you can't control. Right, Brian? He can't control what's going on in China. He can't control what's going on with his competitors. He can only control what's right in front of him. And where I salute him as he has spent time going around to different Starbucks. Is that even the right way to say plural Starbucks and really paid attention. How long do I have to wait for my coffee? What is the food like? What does the line look like? I don't know if you saw Maxonomics, which is. It did a great video. Philandre's a great video with timing, how, how, how quickly coffees come out. That attention to detail as opposed to just delegating this out is really critical. And getting in the weeds and going around and seeing what's wrong and saying, okay, here are the things we can change. Here's what is in our control. We can get our wait times down. Why aren't we doing it? Food and Starbucks is terrible. I don't. Last time you try.

[Neal Freyman]

Like, I've never had it. I rarely do.

[Ann Berry]

Why? Why do why have you rally?

[Neal Freyman]

It does not look good. The presentation, everything about it. Yeah.

[Toby Howell]

He's also a Dunkin guy though.

[Ann Berry]

So I get why America runs on Duncan's my favorite coffee. But to your point, what you've just said though, that's real, that's real consumer feedback. Right. You've just talked about the user experience. It doesn't look good. You're not going to buy it. A good CEO Toby, in my opinion can go around, listen to the Neil's of the world and say we're going to change that, we're going to change that.

[Toby Howell]

Neil's an activist investor.

[Neal Freyman]

Yeah, I actually want to hear your opinion too. Which one of these five companies do you think you could go into and do a good job? They pay you 100.

[Ann Berry]

But you personally, if you're giving me.

[Toby Howell]

100 million, honestly, Nike is probably the one being because I mean it's called like dog food in the product. Like you go and test out the product. I have probably worn, I've worn Nike my entire life running and soccer as well. So that's definitely like a company that I do feel like I would want to have the chance to just because like I do like love their products and have tried them out. So I think Nike is one that I could just give me the reins people. We could turn this, turn this puppy.

[Ann Berry]

Wait, wait, wait, wait. We're not going to let you go. I'm going to. You went.

[Toby Howell]

Yeah.

[Neal Freyman]

No. Let's needle Toby. We're needling to Kobe.

[Ann Berry]

But Under Armour, right? Kevin Plank, CEO, went over to China to go back to China, I think is leaning in with Steph Curry. Right. So is it Nike the product or is it Nike because you have this like nostalgic attachment to everything it represented with the NBA and other great, you know.

[Toby Howell]

Well, I think they have a huge opportunity to regain their market share of the running market. I mean Nike was like the thing that brought running back to or like basically helped create the running boom in America. But then they've lost their way. They have these run clubs don't interact with Nike anymore. They've pulled back out of a lot of these wholesalers. So I think there's a huge opportunity there for them to get back in touch with their roots and just say like, hey runners, we see you again. So I think there's a lot of opportunity there even. And I'm not so worried about like the Under Armours of the world like that because they don't have like the heritage that, that Nike does. So that's why I mean, put me on the spot, but that is generally probably the position I'd like to be. And look at that. We're both, we're all CEOs these days, you and me, and we're going to turn things around. We're going to finish off the show with some rapid fire questions. These kind of run the gamut and we are going to ask you to speculate a bit. None of this is financial advice, but we'll put you on the spot here. Are you ready to rip these rapids?

[Ann Berry]

My temperature's gone up a little toasty.

[Toby Howell]

It is a little in here. All right, first question. Which of these private companies will go public, public first this year in your opinion? SpaceX Stripe, Klarna, Coreweave or StubHub?

[Ann Berry]

Klarna.

[Neal Freyman]

Oh, and Klarna is a buy now, pay later giant because you've had insight.

[Toby Howell]

Into, you've talked to some of these buy now pay later CEOs and you think that it's just time for them.

[Ann Berry]

Well, the Klarna CEO has been out there talking about all of the things that he's been doing in preparation for an ipo. It's been, it was speculated to go out last year, so it's behind its kind of time. But this was an interesting one. Do you remember Klarna came out and said we have basically like fired our soft where providers like the sales and we've taken it all in house and it's way more productive. Slash, we've taken our cost. That to me is pre IPO preparation talk. That's like getting everyone amped up and ready to see them.

[Toby Howell]

That gets the market very excited. Yeah.

[Neal Freyman]

Will Google be broken up? The DOJ wants to to it to sell off Chrome and the judge will rule on this next summer.

[Ann Berry]

No, I don't think so. I think there's going to be a really long and protracted lawsuit. Can go on and on. I think they're. If I were Alphabet, I'd be delighted that there's a change in administration coming and I'd be going back in there and look, I think Ruth Porat, by the way, brilliant operator like that whole group over at Google and Alphabet, they're going to be arguing, are you kidding me? Have you seen what's going on with Chat GPT for search? Have you seen what's going on with Perplexity? Have you seen what's going on with Bing? The game's going to change kind of.

[Toby Howell]

On the same question. Do you think Tick Tock will actually be banned? Been rumored for a Long time. Do you think that will come through in 2025?

[Ann Berry]

I do not. I don't think it'll be banned. I do think there's going to be battle to for force bytedance to sell it to a US owner.

[Neal Freyman]

What is a merger that could happen in 2025 that no one will have seen coming?

[Ann Berry]

Oh, I'm stumped. I hate being.

[Neal Freyman]

No, it's fine.

[Ann Berry]

It's never stumped. No. I'm going to have a second and I'm trying to come up with an answer for you. One that no one ever saw coming. Okay, here's one that I think is, is not like crazy creative but I think needs to happen or these companies are going to die. Do you know all of these direct to consumer brands that went out in 2020? 2021, they went out the IPO, put their spark, you know, I think rent the Runway, revolve, stitch, fix. All of these fashion type brands need to find a way to get together.

[Toby Howell]

I love that answer too because we have talked about the rise of like vintage closing this past year. So I do think some of these vintage sites will the real real. Yeah, the real real shop up. Like these do have an audience. So I love that.

[Ann Berry]

Consolidate or die. Yeah, that's what I say.

[Toby Howell]

We just needed to give you a little time. You got one. This won't take you a lot of time. What's your favorite, favorite ticker symbol?

[Ann Berry]

Why is that more stumping than the others? I don't get it. What's my favorite tickers? I like spot for Spotify. I don't know why. Aesthetically it's like nice looking letters. Curvaceous.

[Neal Freyman]

And you can say it like it's an actual word.

[Ann Berry]

It means something.

[Neal Freyman]

Yeah.

[Toby Howell]

What is Harley Davidson's hog? Hog. That's a pretty good one there too as well.

[Ann Berry]

Why have they got it as hog?

[Toby Howell]

Because they call them hogs. I don't know. Why do they call motorcycles hot dogs? That's just what they call them though.

[Ann Berry]

I don't know. Something very Mad Max and unsettling about that. I'm not sure. Yeah, I go on like sports better. There's this character. I grew up in London and England. I get Spot the dog was like a very beloved character when I was growing up. So it's like a nostalgic thing.

[Neal Freyman]

Speaking of that, what is the biggest difference between New York and London?

[Ann Berry]

The pace. New York has got this energy. I've got this. I've got a really clear thesis on York and I've been living here for A long time now. York's a really difficult place to live in. I don't know if you guys. It's dirty, it's crowded, it's claustrophobic, it's expensive. Some things are really convenient, other things are not. But everyone wants to come in. Not everyone. Lots of people want to come here, and lots of people stay. And so I think, as a result, when you've got a city that's really densely populated and it's filled with people who've chosen to stay here and withstand all of that, and they've survived it, these are resilient, creative, energetic people, and I love that energy. And you don't have that, I think, either in London or anywhere else, I'd.

[Toby Howell]

Hire you as a spokesperson right there. That makes me want to move to New York.

[Ann Berry]

Eric Adams, if you're listening, and I already live here.

[Toby Howell]

Yeah, yeah. All right. Best book to learn about investing. If I'm a listener listening to this was one book. You would tell me to list or to.

[Ann Berry]

To read one book. Can I cheat? I really don't.

[Toby Howell]

Either way, there's no rules on this.

[Ann Berry]

I'm going to tell you another story. So when I went. When I started my career in investing, guess who I wrote to to say you inspired me to go into investing and you equipped me. You taught me to be an investor. Who do you think?

[Neal Freyman]

Rory and Kitty.

[Toby Howell]

Warren Buffett.

[Ann Berry]

Both great aunts. Thank you, Neil. I wrote to my English literature teacher in high school, and the reason I wrote to my English lit teacher, I said, you know what I had to do in high school? We've all had to do this. You have to take random pieces of poetry, random pieces of prose, and you need to come up with an opinion. You need to break it down. You need to analyze this, and you need to articulate and justify your view. Okay? Investing is the exact same thing. Yes, it's with numbers, but it's also with judgment. You need to take something you've never seen before. You need to come up with a perspective, and you need to justify. If you can't justify it, don't put your money there. That's my rule. So that's my cheat answer.

[Toby Howell]

That is a great answer. And I'm gonna. I still have my English teacher from high school's number, so maybe I might hit up Mr. Mr. Flanagan, I know you remember yours as well. That is all the time we have today. And thank you so much for hopping on the show. Everyone make sure you follow brew markets on social media. You'll see. And dropping some knowledge on their Instagram and TikTok. Also listen to after earnings to hear and chopping it up with some of the biggest examples executives in business. And it was a pleasure and I hope you have a happy 2025.

[Ann Berry]

Happy New Year guys. Thanks for having me on.

[Neal Freyman]

Happy New Year.

[Toby Howell]

Wait, wait, wait. Before you go, Neil has one more thing to tell you.

[Neal Freyman]

It's time to come clean. Hosting Morning Brew Daily isn't my only job.

[Toby Howell]

Wait, are you Batman?

[Neal Freyman]

No, when I'm not here sitting next to Toby. I'm also the Executive Editor of Morning Brews free daily newsletter. If you love the pod, you'll love the newsletter. Not only does it give you your daily dose of news, but it also has crosswords and trivia and jokes written by people way funnier than me and Toby.

[Toby Howell]

I hate to admit it, but it's true. I read it every day and I think you all will love adding it to your routine as well.

[Neal Freyman]

Subscribe now at Morning Broadcom or head to the link in the Show Notes.