Motley Fool Money: "Don't Be a Grinch, Keep Holding" – December 30, 2024

Hosted by Dylan Lewis, Ricky Mulvey, and Mary Long

Introduction

In the December 30, 2024 episode of Motley Fool Money, host Dylan Lewis engages in an insightful discussion with Motley Fool analyst Jason Moser. The conversation navigates through the year-end market dynamics, consumer debt concerns, Alphabet's strategic moves in AI, and personal resolutions as the new year approaches.

Market Performance and Year-End Dynamics

Dylan Lewis opens the discussion by highlighting the unexpected downturn in the S&P 500, which has dipped approximately 2% since Christmas, challenging the traditional notion of the "Santa rally."

• [00:54] Dylan Lewis: "We have the S&P500 down about 2% since Christmas. What happened to the Santa rally?"

Jason Moser provides context, explaining that year-end selling is not uncommon as investment firms engage in tax loss harvesting and investors trim their portfolios.

• [01:18] Jason Moser: "It's not unheard of for some selling to occur towards the end of the year... We see investment firms cleaning house... and taking advantage of some tax loss harvesting."

Despite the recent dip, Moser underscores the robust performance of the S&P 500 year-to-date, boasting a total return of approximately 26-27%, emphasizing that the year's gains are substantial.

• [02:22] Jason Moser: "The S&P right now, year to date at total return, somewhere in the neighborhood of 26, 27%. So that is absolutely nothing to sneer at."

Portfolio Management and Investment Strategies

When asked about year-end portfolio adjustments, Jason Moser shares his conservative approach, focusing on nurturing winning investments while planning selective sales to fund future expenses, such as college tuition.

• [02:29] Jason Moser: "I typically don't do end-of-year tidying up... I’ve been focused a lot more on my winners and trying to spot opportunities to add to them..."

Conversely, Dylan Lewis mentions increasing his 401(k) contributions to maximize new matching benefits, highlighting proactive retirement planning.

• [03:07] Dylan Lewis: "Only changes for me was upping what I can contribute to my 401k on a paycheck basis... hitting that new match thanks to the IRS bumping things up $500..."

Consumer Debt and Economic Outlook for 2025

A significant portion of the episode delves into consumer debt, particularly credit card delinquency rates, and their implications for the economy in 2025.

Jason Moser paints a nuanced picture of the consumer landscape, describing it as a "tale of two economies." While higher earners maintain stability with a steady personal savings rate, lower earners are increasingly vulnerable, with lenders writing off a record $46 billion in seriously delinquent credit card debt in the first nine months of the year—a 50% increase from the previous year.

• [04:08] Jason Moser: "We have a new administration... there are a lot of questions that remain... it's been a really good Year for the market... that is absolutely nothing to sneer at."

He expresses concern over the lower third of consumers, who reportedly have no savings, highlighting the fragility of discretionary spending which could impact retail sectors reliant on these consumers.

• [05:27] Jason Moser: "The lower third of consumers... essentially have no savings at all. And I think that's where we start to get a little bit more concerned..."

Dylan Lewis notes that recent holiday spending data, such as the National Retail Federation’s estimate of nearly $1 trillion in holiday expenditures and the fact that a third of consumers incurred debt during the holidays, might not yet reflect the full impact of tightening budgets.

• [06:07] Dylan Lewis: "It doesn't seem like this has yet affected what people were doing at the stores... a third of consumers have taken on debt during the holidays."

Jason Moser anticipates that the financial strain on lower earners will worsen post-holiday season, potentially leading to increased delinquencies and tighter discretionary spending in 2025.

• [06:07] Jason Moser: "It's going to be really worth paying attention to when we see these banks announce report earnings here in January."

Impact on Retail Sector

The discussion transitions to the retail industry's vulnerability to consumer spending patterns, especially amid economic uncertainties.

Jason Moser forecasts a varied performance among retailers, dependent on their target demographics. High-end retailers like Lululemon may fare better due to their affluent customer base, while mass retailers like Target and Walmart might experience shifts as even higher earners seek value-driven options.

• [07:47] Jason Moser: "Companies like Lululemon... might fare well... watching the performance of companies like Target and Walmart..."

Alphabet's AI Strategy and Market Position

Shifting focus, the conversation explores Alphabet's strategic positioning amidst the rise of artificial intelligence and growing antitrust pressures.

Dylan Lewis outlines Alphabet CEO Sundar Pichai’s proactive approach in integrating AI across Google's platforms, including initiatives like the Gemini app and Project Mariner, which aims to embed AI agents within the Chrome browser.

• [09:08] Dylan Lewis: "We're seeing the AI overviews from, for search... pushing this Gemini app... Project Mariner offering... an AI agent within the Chrome browser..."

Jason Moser acknowledges AI as both a potential threat and opportunity for Google. He emphasizes Google's adaptive strategies to evolve rather than be disrupted by AI, drawing parallels to how companies handled the mobile revolution.

• [10:10] Jason Moser: "I tend to view it a little bit more as an evolution... Google is starting to really work on ways to bring AI into their universe..."

Moser remains optimistic about Google's ability to leverage its extensive user base and diverse platforms to integrate AI effectively, suggesting that Alphabet's diversified revenue streams beyond advertising position it well for future growth.

• [12:23] Jason Moser: "They have so many platforms with so many users... I'm going to take the glass half full perspective here... they'll find out ways to monetize things like Gemini..."

Personal Resolutions and Closing Thoughts

As the episode concludes, Dylan Lewis and Jason Moser share their personal resolutions for the upcoming year, intertwining professional and personal growth.

Jason Moser aims to enhance his investment discipline by minimizing unnecessary sales and introducing new dividend-focused stocks to his portfolio. On a personal level, he commits to maintaining a positive outlook to positively influence those around him.

• [15:05] Jason Moser: "Just trying to be a better person... approach each day with a fresh, positive perspective."

Dylan Lewis emphasizes the importance of establishing a structured daily routine to foster preparedness and positivity, acknowledging the challenges of maintaining such rhythms in a remote work environment.

• [17:01] Dylan Lewis: "I'd like to bring a little bit more stability and structure into my day... a little bit more prepared, a little bit more positive..."

The hosts encourage listeners to share their resolutions, reinforcing the community aspect of the podcast.

Conclusion

In this final 2024 episode of Motley Fool Money, Dylan Lewis and Jason Moser provide a comprehensive analysis of the current market landscape, consumer debt challenges, and Alphabet’s strategic maneuvers in the evolving AI domain. Their candid discussion offers valuable insights for investors navigating the closing of a tumultuous year and anticipating the economic and technological shifts of 2025.

Notable Quotes:

• Dylan Lewis [00:54]: "We have the S&P500 down about 2% since Christmas. What happened to the Santa rally?"

• Jason Moser [01:18]: "We see investment firms cleaning house... and taking advantage of some tax loss harvesting."

• Jason Moser [04:08]: "The lower third of consumers... essentially have no savings at all. And I think that's where we start to get a little bit more concerned..."

• Jason Moser [10:10]: "I tend to view [AI's impact on search] a little bit more as an evolution..."

• Dylan Lewis [09:08]: "We've seen them also push this Gemini app... Project Mariner offering, which is very prototypey, very researchy."

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