The War at Home

A down start to 2025... Terror in the U.S... What's always part of the story... The market made history in 2024... A brief look ahead... Where the bull market could go from here... The mailbag is back...

2025 is here...

And I (Corey McLaughlin) can't say it's off to a happy start...

In the first hours of the new year, a 42-year-old U.S. Army veteran drove a Ford truck into dozens of revelers in New Orleans' French Quarter, killing at least 14 people...

We learned more details afterward. Before the attack, Shamsud-Din Jabbar also planted explosives in the area that were later discovered and posted several videos to Facebook showing his state of mind.

He said he joined ISIS before this summer, after dreaming about joining the terrorist group, and originally planned to harm family and friends in a violent display. Apparently, he ruled out this plan over concerns that the media would not focus on the "war between the believers and the disbelievers."

So he created a nightmare for strangers instead.

Several hours later, Matthew Livelsberger, a 37-year-old active-duty U.S. Green Beret – who was on leave in Colorado but whose family hadn't heard from him in days – blew himself up in a Tesla Cybertruck outside the entrance of the Trump International Hotel in Las Vegas.

It might take the FBI time to say it, but the incidents sure appear related. Both involved electrically powered pickup trucks acquired via the same peer-to-peer rental app, Turo. And both involved U.S.-born military servicemen who served in Afghanistan around the same time. They brought the war home.

Market action seems almost trivial today...

But on we go.

First off, there is a financial angle here...

The New Orleans attacker had financial troubles, according to lawsuit filings involving him and an ex-wife. This includes $40,000 in credit-card debt and an unsuccessful foray founding a real estate company in Texas.

Of course, many people experience stress about money without joining terrorist groups and going on murderous rampages. But financial security, and a lack thereof, is at least part of the backdrop of the tragedy.

And it won't be the last time... After all, a constant devaluation of our dollars – the ever-present scourge of inflation and our debt-reliant financial system – has more impacts than most people can imagine...

Today, the market opened for the first trading day of 2025, and the major U.S. indexes finished lower. The S&P 500 and the Nasdaq Composite Index were off 0.2%, and the Dow Jones Industrial Average lost 0.4%.

This comes after the markets bounced up and down during our Digest holiday series.

The S&P 500 rose a few percent heading into Christmas Day, then gave it all back over four straight days of losses to end 2024. But the U.S. benchmark index still finished the year 23% higher, following a 24% rise in 2023.

History was made...

This is the first time the S&P 500 begins a year after having returned more than 20% in two consecutive calendar years in a quarter of a century. The last time was in the rollicking nothing-can-go-wrong days of the dot-com bubble in 1997 and 1998.

If you believe in history repeating and clean analogs, that will portend the year ahead being more like 1999 (another up year)... before the party ends in painful fashion.

We'll have plenty of time to discuss bullish and bearish arguments this year, we suspect...

A brief look ahead...

As we return from the holiday break, inflation is still picking up (again)... Congress has given the Treasury Department the green light to pay for spending decisions with more debt (again)... and the Federal Reserve is still promising to cut interest rates (again)...

Throw in that President-elect Donald Trump is about to return to the White House for the second time and the uncertainty about what campaign promises might become reality, and that's a recipe for a potentially rocky road for the market...

We're already on it somewhat. All of the major U.S. stock indexes are now trading below their short-term 50-day moving averages, though all also remain above their longer-term 200-day moving averages.

That was the case for the entirety of 2024, and stocks kept climbing a proverbial "wall of worry." We'll be keeping our heads as straight as we can as the next chapter of this market unfolds. Here's some perhaps worthwhile trivia to get us started...

Those dot-com bubble years of 1997 and 1998 were followed, as we mentioned, by another year of gains in 1999 (of 19%). Then came three straight years of double-digit declines.

Before that period, the last time the U.S. benchmark index gained 20% or more in consecutive calendar years was 1954 and 1955. A 3% gain followed in 1956 before a 14% drop in 1957.

This is a small sample size, and not exactly a reliable predictor of much. But it does help make a case that the bull market that started in October 2022 is due to lose some steam and could be moving closer to a finish as the upcoming year goes on.

Now, this doesn't have to be bad news...

The average return of 27 bull markets since 1928 is around 115%. The S&P 500 is up about 65% since its low in October 2022, only a little more than halfway through the historic bull market return.

But that's an average, a compilation of individual outcomes that in the present are defined by their own circumstances. Though as we also know, human nature and fear and greed are always central to Mr. Market's behavior, too.

To that point, we'll track the trends, our favorite indicators, and potential volatility-inducing risks. And we'll bring you our team's analysis and favorite research intended to help you keep your portfolio protected and growing in 2025, whatever it looks like might happen next.

New 52-week highs (as of 12/31/24): Alpha Architect 1-3 Month Box Fund (BOXX), CyberArk Software (CYBR), and VeriSign (VRSN).

The mailbag is back. We combed through your notes to find thoughts on research about the "twin peaks of inflation" published by Stansberry's Credit Opportunities editors Mike DiBiase and Bill McGilton in their December issue... thoughts on the Federal Reserve (of course)... and feedback for regular Friday Digest essayist Dan Ferris... As always, send your notes to feedback@stansberryresearch.com.

"Hi Corey, That certainly was an interesting correlation between inflation and monetary policy. Freshly out of small-town high school in '73 and starting out on my own, I was not investing and had little understanding of macroeconomics outside of headlines in the newspaper.

"While monetary policy may have set the stage for the inflation cycles, it seems that the Arab Oil Embargo crisis actually triggered the rise in inflation (and perhaps was exacerbated by Nixon's resignation), similar to the way the Covid crisis did for this cycle. Nobody seems drawn to that connection. Thankfully, this cycle so far has not been as extreme and of shorter duration...

"Maybe we'll be better this time and have a less severe secondary recession – perhaps guided by advanced artificial intelligence! (this is me snickering)." – Subscriber Mike D.

"Many of us enjoy 'Monday morning quarterbacking,' especially when it comes to the Fed. I'm not an economist, but I don't understand why the Fed would continue to cut rates when they are predicting higher inflation in 2025. Do they have short memories and don't remember the 1970s? Do they want to put themselves in [Paul Volcker's] position and need to raise rates massively to finally get inflation under control?

"If their position is the economy needs more help than inflation control then they're admitting both inflation and the economy are in trouble. Is this not the proverbial 'stagflation' definition?

"I think it's time we realize the institutions allegedly designed to protect us are actually the ones causing all the problems. Maybe there's a better way." – Subscriber James V.

"Dear Dan, I have followed you religiously for as long as I have been a Stansberry customer. I look forward to your column every Friday. I am turning 80 this week, so I have lived through the highs of the 1980s, 1990s, 2000s, etc. I spent 10 years as a broker with Morgan Stanley and followed the daily drama of the markets.

"You are correct. All those riding so high today remind me of clients I had around Y2K who I urged to take profits or at least protect their upside with stop-loss orders. 95% of them refused my advice because they did not want the tax consequences of a sale. That is when I cashed out and retired.

"Continue speaking truth to power, my friend. One day soon, you will be proven correct, and all will kneel at your doorstep. Cheers, and Merry Christmas." – Subscriber Bud R.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
January 2, 2025