The Fed story heading into 2025... On top of that... The Gulf of America and Trump's thoughts on interest rates... The slow-to-react central bank... A mixed jobs report... Another high(er) inflation signal... It's not coming undone yet...
 The shift is on...
Remember that one-day meltdown last month when the Federal Reserve "surprised" the market? When Fed Chair Jerome Powell acknowledged that because the pace of inflation was picking up again, investors should expect less monetary "juice" from the Fed this year? On December 18, the Fed concluded its latest two-day policy meeting and made its quarterly projections – showing expectations for more inflation in 2025 and fewer rate cuts. That day, the tech-heavy Nasdaq Composite Index lost almost 4% and the benchmark S&P 500 Index fell roughly 3%... The market looked like it was having a panic, and though the major U.S. indexes saw a brief rebound heading into Christmas, they sold off into year-end. They finished 2024 right around where they did on the date of the last Fed meeting. Now, as we head into 2025, we're starting to see the story continue... First up, over the weekend, a pair of Fed policymakers – Governor Adriana Kugler and San Francisco Fed President Mary Daly – spoke at an economic conference in San Francisco. Both said they don't think the central bank's inflation-fighting job is finished. Kugler put it this way... We are fully aware that we are not there yet – no one is popping champagne anywhere. If current trends continue, I (Corey McLaughlin) suspect this could be the start of a change in tone from the Fed about its posture as the year goes on... As we've been reporting the past few months, inflation in the U.S. economy did pick up in the fourth quarter of 2024 (after the Fed began to cut rates in September). That's based on the indicators that the Fed itself purports to use, as we wrote last month... In November, the producer price index rose 0.4% from October and the consumer price index was 0.3% higher month over month. Some very simple math tells you that's well above a 2% annual rate (12 months times 0.4% is 4.8%, and 0.3% annualized is 3.6%). Recall that before the pandemic, a "normal" monthly inflation rate was 0.1% to 0.2%. Those are the numbers for just one month. Other measures of inflation have also remained higher for longer, like the Fed's supposed preferred measure: the core personal consumption expenditures index, or core PCE. It measured 0.3% month-over-month growth in September and October. Powell and the Fed hit investors over the head with this reality last month with their projections for more inflation and half the rate cuts they previously signaled for 2025. Powell's press conference after the meeting removed any uncertainty about the reasons. And the next major round of inflation data will begin to hit the market relatively soon... December's producer price index ("PPI") comes out a week from today, followed by the consumer price index ("CPI") next Wednesday. On top of that... It appears enough investors are also betting on a new White House administration and Congress having something to do with even more inflation moving ahead. As editor Whitney Tilson and our Stansberry's Investment Advisory team wrote in this month's issue of our flagship publication... Financial markets have collectively decided that Donald Trump's return to office will likely lead to higher inflation. We can see this by looking at the U.S. five-year Treasury bond, which serves as an important benchmark for business loans and mortgage rates. Heading into the election, the yield on the five-year Treasury was 4.1%. Today, that's up to 4.4%. That was on Friday. Today, the five-year Treasury yield neared 4.5%. The 10-year Treasury yield was near 4.7%, its highest level since April and more than 100 basis points higher since September 16. The major U.S. stock indexes were also lower across the board today. The Nasdaq was down about 2%, and the S&P 500 closed more than 1% lower. Not coincidentally, I don't think, the current trend in higher yields began two days before the Fed cut interest rates by 50 basis points and amid growing expectations for a Trump win in November. He won... and two months on, yields have continued higher. Meanwhile, the U.S. stock indexes haven't made a new high for a month. The stage is set... Perhaps these expectations will change moving ahead. After all, we're already seeing a few surprises from the coming Trump administration... like today's declaration from the president-elect during a press conference that "we're going to be changing the name of the Gulf of Mexico to the Gulf of America" in what sounds to me like some kind of negotiating messaging tactic related to international trade. In the same press conference today, Trump made his first public comments on interest rates since being elected, saying... Inflation is continuing to rage, and interest rates are far too high. This is the backdrop heading into 2025. Even before those comments today, the markets have already shown greater expectations for inflation and/or growth, depending on your point of view, than they did just a few months ago. That's because, even as inflation numbers have picked up, the slow-to-react Fed seems like it still doesn't want to slow the economy either. During the same panel discussion over the weekend, Daly, for example, said she's concerned about jobs... At this point, I would not want to see further slowing in the labor market – maybe gradually moving around in bumps and chunks on a given month, but certainly not additional slowing in the labor market. That means that rising unemployment would probably be a trigger for more rate cuts, inflation be damned. This is the delicate and impossible dance that the Fed does when it thinks it can choreograph a $29 trillion U.S. economy and balance its dual mandate of "stable prices" and "maximum employment." Today, we saw another 'mixed' jobs report from Uncle Sam... This morning, the Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey ("JOLTS") report. In November, job openings jumped to 8.1 million from 7.8 million in October, reaching the highest level in six months. That number also came in above the Wall Street estimate of 7.7 million openings. But businesses are having a tough time filling these positions. Just 5.3 million people were hired in November, right around the lowest level since the pandemic. And if you exclude the pandemic, you'd have to go back to October 2016 to find a month with so few hires. That's not exactly an indicator that people are desperate to find a new job. Quits and total separations are also trending lower, with separations hanging around 2017 levels for the last six months. When folks were job-hopping for better opportunities back during the pandemic – in November 2021, for example – 1 million more people left their jobs than in November 2024, and more than 1.5 million more people were hired. Today's release fits into the theme we've seen with the labor market in recent months... The overall labor market is lukewarm – it's not growing like crazy but not flashing signs of an imminent recession. (We have highlighted a few red flags in previous Digests, though – like here.) Some investors may take the jump in openings as a sign that the jobs market is heating back up, hoping this could alter the path of interest-rate cuts from the Fed. But even the Bureau of Labor Statistics called the job openings number "little changed" from the previous month. It's going to take more than one month of data (that's likely to be revised anyway) to sway the Fed's interest-rate policy. Friday's "nonfarm" payrolls report, which brings with it an updated unemployment rate, could tell us more. Another report today was more notable, though... At 10 a.m. Eastern time, at the same time as the JOLTS report, the Institute for Supply Management released its own survey measuring services-business activity. And this report did contain a significant nugget. Overall service-sector activity rose in December. That's not new, though. It marked the 10th month of expansion for 2024. But one of the segments indicated inflation might be about to pick up... The "prices paid" measure rose to 64.4% in December. That's a big jump from the reading of 58.2% in November, and it marks the highest level for prices since February 2023, when inflation was running at a 6% annual rate. A reading of 50% is considered neutral and suggests the service sector in the U.S. is neither expanding nor contracting. This report spooked markets, with the major U.S. stock indexes selling off sharply and bond yields rising as soon as the release hit newswires. Keep watch... Like the jobs news, it'll take time to see if this red flag shows up in inflation data and consistently enough to sway the Fed into halting its rate cuts. The way the Fed works, by relying on backward-looking data, it might take months. This is all to say this bull market might not be undone by higher inflation readings just yet, but the bond market is again delivering signals about higher inflation expectations ahead... and the sentiment could be drifting more and more into stocks, too. The S&P 500 and Nasdaq – while still trading above their longer-term, 200-day moving averages – haven't made a new high since the days before the previous Fed meeting in mid-December. Federal-funds futures traders are betting that the Fed probably won't cut interest rates at its first meeting of the new year in a few weeks, on January 28 and 29. But these same traders still think rates might continue "easing" as the year goes on. So if the Fed shifts its posture further from "help mode" to one designed to cool things off and rein in inflation, stocks could fall further. Monetary policy won't change the business models of the world's best-run, cash-generating businesses. But the Fed can create volatility that hits the whole market. Proceed accordingly.
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 Prepare for This Postelection Surprise Marc Chaikin's Power Gauge flagged 44 of the top 50 stocks of 2024 in advance of their massive gains. Recently, he stepped forward with a must-see market prediction for 2025... driven by a rare signal – with 93% historical accuracy – which he has never shared before. His presentation includes two free recommendations (tickers included). Click here to watch – before it goes offline. | | |
New 52-week highs (as of 1/6/25): Antero Resources (AR), CyberArk Software (CYBR), EQT (EQT), Alphabet (GOOGL), United States Commodity Index Fund (USCI), and VeriSign (VRSN). In today's mailbag, feedback on yesterday's edition about the "1999 indicator" to watch this year and the artificial-intelligence boom, or bubble, depending on your view... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "I was involved with AI from its earliest years, over 20 years ago. All the theoretical work had been done, but memory was so expensive and data was so scarce that it just wasn't possible to make a working system. I read several texts on neural networks, weighting, and object recognition, but the systems available at the time just could not handle the amount of data needed to produce usable results. "At the time I was in the DuPont Electronics Department as a field troubleshooter in printed circuit board (PCB) manufacturing. I was too good at it. Customers and our sales force didn't want anyone but me to work on their problems. As a result, one year of the 250 working days I was on the road for 196. That was my highest on the road year, but the years before and after were pretty close. I was burning out. My wife was essentially raising our two young sons by herself. "So, DuPont wanted to clone my experience into an AI system. (You may not remember it, but back in the 1980's there was another AI craze.) So for two days I sat with a bunch of computer geeks and they tried to understand my experience in PCB production. For example, [in] a broken circuit no current could flow. What could be the cause? Under exposure of the resistor... a scratch from the cleaning process, a bubble from the electroless copper process, and a bunch of others. So how does this AI system figure out what's going on? It needs a few hundred images of failures that have been documented to have been caused by a particular problem. Good luck getting that. "And that's only good for current technology. At the time everything was imaged with phototools, lithographic images of the circuit pattern. What happens when you move on to a new technology like laser exposure? You start all over again. "Today's AI is not capable of independent thought: finding a solution to a new problem. All it can do is spit back what it finds on the web – and we know how accurate that is. In my opinion, steer clear of the AI bubble, or at least be ready to sell at the first hint of trouble." – Subscriber Earl H. All the best, Corey McLaughlin with Nick Koziol
Baltimore, Maryland
January 7, 2025
Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation. | Investment | Buy Date | Return | Publication | Analyst | MSFT
Microsoft | 11/11/10 | 1,390.6% | Retirement Millionaire | Doc | MSFT
Microsoft | 02/10/12 | 1,367.5% | Stansberry's Investment Advisory | Porter | ADP
Automatic Data Processing | 10/09/08 | 1,041.7% | Extreme Value | Ferris | BRK.B
Berkshire Hathaway | 04/01/09 | 700.4% | Retirement Millionaire | Doc | TT
Trane Technologies | 04/12/18 | 512.6% | Retirement Millionaire | Doc | WRB
W.R. Berkley | 03/15/12 | 511.4% | Stansberry's Investment Advisory | Porter | AFG
American Financial | 10/11/12 | 473.2% | Stansberry's Investment Advisory | Porter | TTD
The Trade Desk | 10/17/19 | 446.3% | Stansberry Innovations Report | Engel | SFM
Sprouts Farmers Market | 04/08/21 | 441.8% | Extreme Value | Ferris | HSY
Hershey | 12/07/07 | 419.1% | Stansberry's Investment Advisory | Porter | Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.
| Top 10 Totals | | 4 | Stansberry's Investment Advisory | Porter | | 3 | Retirement Millionaire | Doc | | 2 | Extreme Value | Ferris | | 1 | Stansberry Innovations Report | Engel |
Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio | Investment | Buy Date | Return | Publication | Analyst | BTC/USD
Bitcoin | 11/27/18 | 2,620.1% | Crypto Capital | Wade | wstETH
Wrapped Staked Ethereum | 12/07/18 | 2,291.8% | Crypto Capital | Wade | ONE/USD
Harmony | 12/16/19 | 1,350.0% | Crypto Capital | Wade | POL/USD
Polygon | 02/25/21 | 760.3% | Crypto Capital | Wade | HBAR/USD
Hedera | 09/19/23 | 500.4% | Crypto Capital | Wade | Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio.
Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios | Investment | Symbol | Duration | Gain | Publication | Analyst | | Nvidia^* | NVDA | 5.96 years | 1,466% | Venture Tech. | Lashmet | | Microsoft^ | MSFT | 12.74 years | 1,185% | Retirement Millionaire | Doc | | Inovio Pharma.^ | INO | 1.01 years | 1,139% | Venture Tech. | Lashmet | | Seabridge Gold^ | SA | 4.20 years | 995% | Sjug Conf. | Sjuggerud | | Nvidia^* | NVDA | 4.12 years | 777% | Venture Tech. | Lashmet | | Intellia Therapeutics | NTLA | 1.95 years | 775% | Amer. Moonshots | Root | | Rite Aid 8.5% bond | | 4.97 years | 773% | True Income | Williams | | PNC Warrants | PNC-WS | 6.16 years | 706% | True Wealth Systems | Sjuggerud | | Maxar Technologies^ | MAXR | 1.90 years | 691% | Venture Tech. | Lashmet | | Silvergate Capital | SI | 1.95 years | 681% | Amer. Moonshots | Root | ^ These gains occurred with a partial position in the respective stocks.
* The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%.
Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio | Investment | Symbol | Duration | Gain | Publication | Analyst | | Band Protocol | BAND/USD | 0.31 years | 1,169% | Crypto Capital | Wade | | Terra | LUNA/USD | 0.41 years | 1,166% | Crypto Capital | Wade | | Polymesh | POLYX/USD | 3.84 years | 1,157% | Crypto Capital | Wade | | Frontier | FRONT/USD | 0.09 years | 979% | Crypto Capital | Wade | | Binance Coin | BNB/USD | 1.78 years | 963% | Crypto Capital | Wade | | 
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