2025 Will Not Be a Blockbuster Year for Most Companies

2025 will not be a blockbuster year for most companies.

Why?

Everyone believes that, hey, things are going to be great. New election, things are going to boom like they did. People forget a few things. We're used to rates being extremely low. The Fed is predicting that we're going to have 2 cuts in 2025. So the SOFR rate is going to go from roughly 4.4% to 4.5%, roughly where it's at right now. to roughly 3.9 to 4.0. During the Obama years, and for a lot of the Trump years, we're used to interest rates at zero or close to zero, which made everything cheap. And when people look at what's booming right now, if you exclude the, the top 7 companies in the S&P 500, I think what they make around roughly what, 30, 40% of the market cap or something ridiculous like that.

Yeah.

And you, you look at most of the companies that are booming right now, It's purely a lot of AI companies. If you look at the value of the S&P 500, a lot of companies' earnings are down, but the multiples on some of these companies are up, which is making up for earnings not being as great. You look at Tesla, they delivered less cars for the first time in history. So not only having businesses not perform, if you exclude a lot of the AI companies, what caused a lot of companies to boom during the AI or during the COVID days wasn't that interest rates were pretty much zero. We had low interest rates during the Obama administration. What really caused things to boom during the COVID time was the government printing tons of money. And when I say printing tons of money, I'm not talking about, hey, let's send money to this country and help them out here. I'm talking about they printed money with programs like PPP for businesses to help stimulate them, which caused businesses to have tons of surplus of cash. And they had quite a few different programs. Like they even had the Main Street Lending Program. There were so many. They had the, there was one for if you keep employees, you can get reimbursed.

The EIDL.

There you go. And they also started printing money in the form in which they deposited money into a lot of people's bank accounts, the majority of the US population.

The stimulus checks, yeah.

So you start combining all of it, it caused people to have a surplus of cash. So they started going out and spending it. Businesses had tons of money. All this combined caused corporations to grow. If businesses have more money, they also spend it, not just on employees, but there's a lot of B2B companies, they're spending it on software, they're spending on ads, they're spending it on growth. All this caused a ton of things to happen at the right time, from money being really cheap, so private equity companies can just go buy up a lot of businesses because they're looking for high-growth companies, people believing that everything was going to shift to the internet, so they started buying up all these internet companies, people spending And investing a lot because money was being printed. Do I think the economy's going to improve? Yes. Is inflation coming down as fast as we would like? No. I think 2025 is going to be better than 2024. Just like for us, we saw a better 2024 than 2023, but it's not all of a sudden a light switch, you know, gets switched, flipped, and then the economy just starts roaring. I just don't see that happening.

So I don't think 2025 will be a blockbuster year I think it's going to be a good year.

What do you consider a good year?

So a good, okay. Let's say this year. Okay. Even though the S&P isn't exactly the economy, but the S&P was what, up 25% this year, 28%?

Uh, I don't know, but it was up a lot, right? Good chunk.

Yes. So that's a good year for the stock market at least. Right. I think a good year instead of growing like, you know, 20, 30%, we're talking maybe we're growing, you know, the S&P, right? Maybe it's, maybe it's more modest, right? Which is like, it's still a good number. Maybe it's 7 to 10% or something like that.

S&P gained 23.3% in 2022.

Which is extremely high.

And 2023 was 24.2%.

Yeah, I think it's got to come down. It's got to adjust to the mean. And the other thing too is I think interest rates are going to stay higher like this for a little, for a while, right? And the reason I say that is because, you know, Howard Marks, the Oaktree guy, the distressed debt dude. So he always writes these memos, right? And I always read his memos. And then his most recent, like his most recent long memo, says that he believes there's a sea change that happened. This was like when the rates started, um, coming, uh, coming up. And this was like maybe a couple of years ago or so. And I do believe we're probably going to hover around it. It's not going to fall back to zero. I think it might be, you know, a couple percent or so.

Right.

So I think there are going to be some rate decreases. Um, but if rates are higher, that also means borrowing costs are higher too. So people aren't going to borrow as much.

Right.

Um, now if we start to see inflation tick up again, then all bets are off. Right. Then, then it's like, okay, Maybe the printer turns on again, right? Because the Fed can't have— they can't have inflation. The worst is if you have stagflation, right? Where there's very little productivity and also inflation's going up, then there will be hell to pay. That's when you start to see really bad stuff going on.

Yeah.

I think it's going to be modest growth next year, knock on wood. Um, but I think a lot of stuff is priced in. Like, I think a lot of people got excited for the Trump victory and everything. Um, but like everything's already gone up quite a bit.

So at least a lot of the AI companies have gone up.

Crypto's gone up quite a bit.

Crypto's gone up. But if you look at a lot of just traditional businesses, they're not roaring and performing well from a financial standpoint. Yeah, same with job growth. If you look at job growth, if you exclude government employment or indirect government employment, it's not like people are hiring like crazy. They're actually laying off workers.

Yeah, look, I think it's gonna be a good year. And I really like what Jeff Bezos said about the long term. I think So what he said is like, look, this is going to hopefully give us enough time over the years where the productivity from robotics, from AI and everything, the growth outpaces any, any bit of bad stuff that we have going on. And I'm hoping that will be— I believe that will be the case. Um, but him saying that leaves me a little more comfortable.

Yes. And people look at the debt globally, not just the United States, but a lot of, you know, countries like China, US, UK, France, Germany, et cetera. are just in tons and tons of debt. People are like, oh yeah, you know, if you look at the US, the solution is to cut costs and to be in a surplus and pay back all the debt that, you know, we've borrowed over the years. That's very unrealistic. I'm not talking about cutting costs. I'm talking about more so paying back all the debt and not adding more, at least in the short run. What's more realistic is the way you get yourself out of this is just GDP growth and stimulating the economy.

Yeah. And this is what I think is unique. When you look at the past, when you look at, um, the Roman Empire or the Dutch Empire or the British Empire, they all printed too much money and they all got, kind of got over their skis. Right. But, and they're all the reserve currencies, by the way, like we are the reserve currency of the world right now, but we're in a weird, weird spot right now where we, we're all building technology that's gonna completely change. Like this, this technology is gonna shift everything. Yes.

Right.

And I think there's a chance, like, again, robotics, AI, all the health stuff that's going on. It's exciting. And I believe that the progress, not even the progress that US is making, the world is making with this, is going to hopefully set us up to grow out of this. So I don't think 2025 will be a blockbuster year, but hopefully 2026, 2027.

Yeah. And Eric and I both believe that the economy is improving. So 2025 will be better than 2024 overall for businesses. We think the next few years are going to start improving. Will it go back to the heydays of when the government was printing tons of cash and giving out free money to businesses and people in their bank accounts during COVID No, not as much.

They might print, but not as much.

Yeah. And if they do print, they're not just going to give away the money for free to individuals and corporations.

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Maybe once a quarter.

Okay. So it was coming down, the money supply. You can see the graph like slightly went down. It's going back up again. So it has begun. Yeah. Yeah. So, well, I mean, dude, come on, man. This is insane. This, this is COVID right here. It went parabolic. Yes. Yeah. So I'm showing Neil a graph right now, but, um, it was basically since, I don't know, call it 1980s, even, even maybe even 1975, the government started printing more and more and more. I think this is 1975 is when we came off the gold standard, right?

I think so. I don't know.

Right. 1975. That's when it starts to go up, up, up, up, up, up, up.

The US came off the gold standard in 1971.

Oh my, okay, look, 1970 right here. So it's, it's not— it's nothing, right? And then it starts to slightly move up, 1975, and then it starts to keep going up, up, up, up, up. And then 2020, it goes crazy. And then, uh, oh, sorry, this is 2020 over here. It go— 2020 is when it goes crazy. But you can see we've been printing for a long time. But my point is, if you said 1971, It starts to maybe beg the question, maybe there should be a Bitcoin standard. And that's a whole nother conversation.

And I don't know if they will or will not, but—

I'll bet you $100 they will.

The US will adopt the Bitcoin standard?

Yeah. Oh, sorry, sorry, sorry. No, no, no. That's a strategic reserve. I think they'll do a strategic reserve. I don't know about Bitcoin standard.

Totally agree. I think the US will buy Bitcoin, but do I think it'll be the gold standard?

No.

China has tons of Bitcoin supposedly.

Yeah. I mean, but you can make the argument here that there should be some type of—

I agree.

Yeah. But anyway, it is favorable for us to be the reserve currency of the world. So yes, that is it for today, guys. Please don't forget to rate, review, and subscribe. Go to the— go to marketingschool.io/agency to learn more about the Agency Owners Association, and we'll see you tomorrow.