Silver banana goes to…

In this issue of the peel:

• 😎 Now that we’ve recapped 2024 let’s take a look at 2025. Find out why my guy in the emoji is wearing sunglasses below and what is making our future that bright.

• 🛬 Vivid Seats ends 2024 the way we all dream to—selling out for a huge pile of cash. The military-industrial complex grew larger, and so did MicroStrategy’s losses. Finally, Boeing ends 2024 on the most Boeing note possible.

• 👑 This is it. The day of reckoning is here. Wall Street’s most iconic award of 2024 is revealed below—check out the Platinum Banana for Meme of the Year.

The Daily Poll

Previous Poll:

Which 2024 event will have the most lasting impact on the economy?

Fed’s rate cuts and inflation management: 62.8% // The launch of Tesla’s autonomous vehicles: 4.4% // The completion of the AI super-cluster “Colossus”: 18.6% // GDP growth surpassing expectations: 14.2%

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Macro Monkey Says

Outlook 2025

Few groups boast a stronger passion for being wrong than investment analysts.

Only weathermen, analysts in sports, and fortune tellers can compete. But much like my brokerage account, constantly being wrong never stops ‘em from coming out swinging.

And at the end of each year, investment analysts are swinging for the fences, issuing 2025 outlooks like they’re N95 masks in April of 2020. There’s no better way to follow yesterday’s 2024 recap than to check out the big takeaways, so…

Let’s get into it.

What Happened?

I think my grandmother is about to publish, so once she’s done, then everyone will have officially published their investment and/or economic outlooks for 2025.

It’s impossible to hit on each of them here, but we want to go over the big trends that should be at the forefront of investors’ minds heading into 2025 so that we can make sure we’re panicking about the right things.

From Goldman to PIMCO to your friend who’s dying to become LinkedIn famous, the biggest trends to look for across the investment landscape heading into 2025 include:

• Inflation & Interest Rates

• Labor Market & Productivity

• Valuation Dispersion and

• Private Markets

Inflation & Interest Rates

While we spent the last few months of the year keeping our checking accounts positive, banks and policymakers alike spent their time raising their inflation forecasts and lowering their rate-cut predictions.

Goldman Sachs, for example, recently raised their end-of-year PCE inflation forecast for 2025 from 2.1% to 2.4%, accounting for expected tariffs. Still, the firm anticipates healthy GDP growth of 2.5%, along with as many as five 25bp rate cuts.

This tracks exactly the kind of adjustments policymakers at the Federal Reserve have been making in that time, too, now expecting end-of-2025 inflation of 2.6%, up from the prior 2.2%.

Meanwhile, JPMorgan and Fidelity both anticipate similar inflation trends but far fewer cuts than implied by Goldman. According to these firms, the Fed will max at one cut per quarter, so four for the year, but could chill after as few as two cuts.

Overall, the idea here is exactly what financial media has been discussing in recent weeks. 2025 will continue to see elevated but falling inflation. We’ll likely see fewer rate cuts than expected, but we’ll have to wait for the data.

Labor Market & Productivity

Much of the expected strong GDP growth is driven by forecasts of healthy consumer spending, underpinned by strong wage gains via a thriving labor market.

According to annual surveys of employers by Indeed and ZipRecruiter, almost 80% of employers plan to expand headcount. Job listings on both sites remain ~10% above that of November 2019, indicating a structural elevation in labor demand.

The Federal Reserve anticipates slight upticks in unemployment throughout the year, looking to close 2025 with an unemployment rate near 4.4% as opposed to today’s 4.2%.

Plus, as AI begins its journey to increase the unemployment rate by 100%, productivity gains should spell even stronger performance for workers and overall GDP.

Businesses expect to lean harder into AI integration in 2025, boosting output per worker and likely driving extended growth. While expected globally, productivity expansion is projected to be concentrated in the U.S. as it has been in the past.

Since 2014, American worker productivity has grown 17% compared to does-anyone-even-have-a-job growth levels of 5% in the U.K. and 6% in the Eurozone over that same period.

Valuation Dispersion

As these dynamics unfold, particularly those related to interest rates, the expected impact on global equity markets includes growing dispersion in valuation and equity performance.

According to BlackRock, Fidelity, Morgan Stanley, JPMorgan, and everyone else, unsynchronized business cycles, varying rates of disinflation, policy changes, and different levels of technological integration will lead to more variable performances from equity markets globally than we’ve seen in recent post-pandemic years.

Within geographies, bottom-up forces are expected to elevate dispersion within sectors as well. An expected narrowing of the earnings gap between large cap, “Mag 7” stocks and their smaller counterparts is anticipated to spread valuation expansion down the market cap stack.

Basically, due to the global liquidity drain from rate hikes and other monetary policy tightening, markets don’t have this tide that lifts all boats anymore. Equity performance is expected to become much more idiosyncratic.

Private Markets

This has gone on way too long already, but we can’t talk about investing in 2024 and 2025 without detailing private markets.

Since the pandemic, elevated liquidity along with yield and return chasing has caused private markets AUM to balloon. Now sitting at $13tn, the king of privates, BlackRock, forecasts this market to grow to $20tn by 2030.

2025 is expected to be an inflection year for that trajectory. Elevated investment activity, a rise in exits, lower financing costs, and greater demand for long-term capital are all ready to buoy the industry.

Private equity performance is expected to improve, according to Morgan Stanley, as “impacts from overinvestment” in 2021 and 2022 get played out.

Meanwhile, private credit is expected to maintain strong growth. After expanding from a $1tn asset class in 2020 to $1.5tn in 2024, BlackRock expects the sector to reach $2.6tn by 2030.

According to HarbourVest, buyer and seller price expectations are converging as well, boding well for the expectation of increased deal activity.

The Takeaway?

Expect the expected in 2025.

Interest rates will, as usual, be most of the game next year. Fed Chair JPow and the FOMC made sure we’re all hanging on the edge of our seats going into the new year, and how the Fed changes policy relative to our current expectations will likely be the primary driving force of investment returns.

Let’s just fire up the money printer again. 

Career Corner

Question

Question on the connection between S&T and IBD: is S&T involved in equity/debt capital raising for comps? My understanding is no because S&T is facing more institutional investors (HF, PF, etc.) rather than companies. Is it the financing side of a firm’s IBD that typically executes capital-raising transactions?

Answer

There is a group that essentially sits between IB (insiders) and S&T (outsiders), called "Capital Markets". When IB has a transaction that involves investors, like an IPO, secondary offering, or bought deal, Capital Markets will quarterback the execution of the transaction, with S&T as the investor interface.

That can include everything from pricing an IPO to allocating orders. S&T is the customer-facing distribution network that is responsible for "selling" the deal.

To your last question, ST executes the deal by soliciting and gathering orders from institutional investors for the debt securities being offered.

A fixed-income salesperson will regularly provide service to a fixed-income fund manager, who must decide whether or not to buy any of the issues... with help from their fixed-income salesperson (in ST).

Also, I wouldn't describe the divisions in terms of "public" and "private" because they all operate primarily in public financial markets. Rather, think of client relationships: in IB, the client is a company, and in ST, the client is the institutional investor.

They each serve their clients in different ways at different times. I think the difference you are trying to capture is more "insider" and "outsider".

IB is always an "insider" since they will have access to material non-public information about their clients (i.e., are the thinking of M&A, issuance, bankruptcy, whatever), while S&T (and research) operates exclusively as an "outsider" with ONLY public information to recommend investment strategies, execute market trades, etc.

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What's Ripe

Vivid Seats (SEAT) 2.0%

• As someone who’s firmly teamed Ticketmaster in their beef with… everyone, seeing a non-price-gouging-monopolist ticket company’s stock rise makes me sick.

• Not wanting the smoke from the absolute GOAT apparently, Vivid Seats is exploring a sale, according to Bloomberg.

• But much like me when I was on Hinge, just because you’re on sale doesn’t mean you’ll have any buyers. As of now, no interested parties have approached, but Vivid is working with advisers to find a girlfriend, I mean a buyer.

V2X (VVX) 2.6%

• With all these foreign wars, it’s easy to forget the U.S. is constantly at war with its own citizens. Luckily, the DEA didn’t forget, and V2X is hyped about it.

• The company, which makes IT and operational support systems for defense missions, just won a $170mn contract with the Drug Enforcement Agency (DEA).

• I didn’t know we had an agency that enforces drugs, but I hope they come to my house soon. 

What's Rotten

MicroStrategy (MSTR) 8.2%

• The Eskimos are buying more ice, and investors are starting to wonder when we are reaching “enough.” MicroStrategy simply cannot get enough BTC.

• The firm disclosed the sale of another $209mn in equity, used to purchase an additional ~2,100 BTC. With BTC down over the past few days, MicroStrategy is following suit.

• I wouldn’t be surprised if CEO Michael Saylor tries to pull an OpenAI here—except instead of going from non-profit to for-profit, MicroStrategy will become his personal sole proprietorship.

Boeing (BA) 2.3%

• I mean… c’mon. I feel like Mrs. Puff and SpongeBob just failed yet another driver’s test. Somehow, a Boeing 737 was involved in another crash.

• The tragedy that unfolded at Muan International Airport in South Korea this weekend, as Jeju Air Flight 2216 crashed into a barrier upon landing, killing 179 of 181 passengers aboard, was in a Boeing plane.

• Experts are still trying to determine what caused the crash, between faulty landing gear and potential bird interference, but traders aren’t wasting time to see if Boeing can do damage control.

Thought Banana

Platinum Banana Awards: Meme of the Year

Happy last day of 2024. Congrats on making it this far—and I hope your portfolio did, too.

We all know that The Daily Peel publishes nothing but nonstop bangers laced with cutting-edge insights you’d usually need to go under your local highway overpass to find. Today, let’s take a break from all the seriousness we’re well known for.

For the final Platinum Banana of the year, we’ve saved our most thought-provoking insight yet. Let’s dive in.

Meme of the Year

As the Mona Lisas and Sistine Chapels of our era, memes are modern art gone to their most extreme. No better medium exists for sizing up the cultural focal point of a given moment.

The hard part for us is the entire year of 2024 is a long moment. Trying to find one meme to capture the entirety of this year’s pleasantly hellacious vibe is no easy task.

Luckily, that’s why they pay me the big bucks. No thanks are needed, but we’ve found the Meme of the Year and are finally ready to announce it.

So, for the last time this year and with no further ado, let’s congratulate the winner of The Daily Peel’s Platinum Banana Award for Meme of the Year 2024…

Taylor Swift and Nvidia holding up the U.S. economy! (or whatever the f*ck you wanna call it, just look at this picture).

I wouldn’t be surprised if the mastermind behind this genius was one of you apes reading this right now. The only thing I saw more on my timeline this year were Elon Musk’s tweets and Mark Zuckerberg telling me to vote (no).

Widely popular, this meme also captures the nervous success the U.S. economy continued to ride in 2024, an extension from 2023’s climbing of the “wall of worry.”

Taylor Swift’s Eras tour, as cringey as all those videos are, is estimated to have added ~$4.3bn to the U.S. economy, according to Bloomberg Economists. Factoring in indirect spending like parking and dining out, T-Swift could have added as much as $10bn to Uncle Sam’s GDP.

Even JPow couldn’t ignore it. In their July 2023 Beige Book, the Fed was already gushing over the additional spending the Eras tour would generate (bottom of page 12. Now that the era of that tour is officially over, we can thank T-Swift for her service.

Meanwhile, I don’t need to tell you apes about Nvidia. The stock is up 1,141% since Microsoft’s, I mean, OpenAI’s launch of ChatGPT, climbing 190% YTD. As of today, this company—that was just an obscure semiconductor maker a few years ago—is the second largest company in the entire world.

As long as they don’t miss an earnings report, don’t expect that support beam to snap anytime soon.

The Takeaway?

If you made me choose between nervous success and confident losses, the choice is pretty clear, but I’d likely forget the question you asked me anyway. 

Although the pullback experienced in recent days is never fun, this kind of catch-your-breath-moment for a red-hot market could set us up for further upside in 2025.

Whatever happens, we’ll see you there. Happy 2024, apes—hope it was a great year and that 2025 gets even better.

The Big Question: What other memes should have been in consideration? Any memes you’re getting ready for 2025?

Banana Brain Teaser

Previous

Of the land owned by a farmer, 90% was cleared for planting. Of the cleared land, 40% was planted with soybeans and 50% of the cleared land was planted with wheat. If the remaining 720 acres of cleared land was planted with corn, how many acres did the farmer own?

Answer: 8,000

Today

Pumping alone at their respective constant rates, one inlet pipe fills an empty tank to ½ of capacity in 3 hours, and a second inlet pipe fills the same empty tank to 2/3 capacity in 6 hours. How many hours will it take both pipes, pumping simultaneously at their respective constant rates, to fill the empty tank to capacity?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

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