Joey Loss 0:00

All right, welcome back. We are here for the final market chatter of 2025. I'm Joey Loss.

Adam Van Wie 0:06

And I'm Adam Van Wie.

Joey Loss 0:08

And so I've put together just some kind of overview story, like headline stuff that can take us through 2025, which in hindsight was just, what a crazy year. I cannot believe this is the ending of it.

Adam Van Wie 0:23

I mean, are you talking personally professionally? Because it was all of the above.

Joey Loss 0:28

Yeah, it was crazy. I mean, just for us personally, obviously this year was the year of our merger. We had our company dinner last night and it was just feel good, everybody, our spouses were there. It was a good time and yeah, definitely.

Adam Van Wie 0:43

I think everyone had a really good time.

Joey Loss 0:46

Yeah, it was just kind of cool to like look back and be like, oh man, like step out of it for a second and be like, God, what a year.

Adam Van Wie 0:52

So much has changed. And it's. Man, it's just been a roller coaster really. But mostly in a good way. I mean, almost all in a good way.

Joey Loss 1:01

Yeah. Especially Q4 was just particularly crazy. It was like right as my son was born, our phone just started ringing off the hook, which is a good problem. But man, what a whirlwind.

Joey Loss 1:14

And so I'll start running through headlines and I thought maybe we could just color around it and relive kind of what the year was like. So

Joey Loss 1:24

right now I'll start with valuations. Valuations. Right now, if we look at The S&P 500 forward PE ratio, we're currently sitting around 21 and a half to 23 times earnings. Forward earnings in valuations.

Adam Van Wie 1:38

Yep. And. And to me, that says the market is expecting more growth next year. And I think that's a fair assumption considering that where we sit today, and if you look at what's been happening over the last year, you've seen some huge increases in corporate profits. You've seen definitely technology has been in growth mode. I know there's a lot of fear around that, but that's where it is right now. And without some significant catalyst to stop that, I don't think it should stop. I think that it's reasonable to expect some more growth in the next year. We're headed into next year with a very favorable tax situation, both personal and corporate. And. And there's a lot of things that are happening right now that I could see being accretive to growth next year.

Joey Loss 2:33

Yeah, yeah, I think that's right. And if we compare that to the 5 year average, forward PE is about 20x. So to your point that the market's expecting growth. I think a slight bump in that is a healthy expectation. A huge bump in that would be okay. This, that's a little bubbly. But I. I haven't heard as much about the bubble accusations in the last two or three weeks as I heard the six weeks prior to that.

Adam Van Wie 2:59

Probably because the market stalled out. Prior to that it had been on fire, doing basically nothing but going up. Yeah. Over the last, I don't know, five to eight weeks, it seems like we've lost some momentum. We're not seeing the Santa Claus rally this year. We're not seeing a drop really. I mean, it's up and down, but. But it just hasn't materialized. There's still time, but it just hasn't. Hasn't shown up yet.

Joey Loss 3:25

Honestly, I'm fine with that. I mean, if the market rages and then it stalls for a quarter and then, I mean, that, that's cool. I'm okay with that.

Adam Van Wie 3:32

Yeah. I like consolidation periods where you. Where you let the. Let everything that's happened kind of catch up to the market and then usually that leads to an inflection point one way or the other. And. And lately those inflection points have been higher.

Joey Loss 3:47

Yeah.

Joey Loss 3:50

If we move on to market breadth. In June of 2023, just as a comparative piece, in June of 2023, only 1% of stocks were outperforming the MAG7 median.

Joey Loss 4:04

No market breadth.

Adam Van Wie 4:06

No. That's about as low as it goes. Yeah.

Joey Loss 4:09

I mean, how many clients do we have coming in, really, the beginning of this year, who just had like six stocks and they wildly outperformed the S and P because they were all the mag seven.

Adam Van Wie 4:17

Yeah. Like as a. As 10% or less of their portfolio. And they were still massive outperformance.

Joey Loss 4:23

Yep.

Joey Loss 4:25

By late 2025, that number has jumped to 51%, which to me is healthy. 51%.

Adam Van Wie 4:30

I love it. I love it. That's. That's great. The third quarter, as we've gone through quarterly reviews through the fourth quarter, reviewing third quarter, it's been crazy looking at. There wasn't an asset class that did poorly. It was. Everything was up. It was just. I mean, you talk about a good quarter for breadth. Look at Q3 of 2025. It was amazing.

Joey Loss 4:55

Yeah. And what we. We finally saw small and mid caps do something.

Joey Loss 5:01

We saw some cooling off of large caps, and

Joey Loss 5:06

I think particularly this quarter, we've seen some cooling off of large caps and international relative to some other sectors. Bonds have just been steady chugging as rates are cutting. If you own A bond fund. The value's going up a little bit each quarter. It feels kind of nice. Feels a little normal.

Adam Van Wie 5:21

Yeah, I'll take a bunch more quarters just like that one. Honestly, it was. It was great. But obviously that's not going to continue. You're going to see some. Something has to not have a good quarter in the fourth quarter and. Or that's not necessarily true, but sometime soon that has to happen. You just can't have all third quarters because that was just too good to be true.

Joey Loss 5:47

So if we. If you were to make a chart, which I wish I had, but I didn't, in 2023

Joey Loss 5:55

where you say, like, how much of the return of the S P was from the MAG7 for 2023, all of the. The who. 70% of the return came from those seven stocks. The other 493 altogether contributed the other 30%

Joey Loss 6:10

this year. Still a heavy contribution by the MAG7, but it's down from 70 to 41%. And I think particularly late in the year, that's when these other companies started showing up to the dance. And I think that's why we're feeling a little bit better.

Adam Van Wie 6:26

I like that trend. Yeah. I was not a fan of when the Mag 7 was completely dominating the market. That's not. That's not healthy. It's just not. It's not a situation you want to be in. You don't want all of your return coming from a very small number of stocks when the economy is really strong. That should be the opposite of what happens.

Joey Loss 6:49

Now. For this year, Nvidia and Microsoft have kind of carved off into their own sub mag seven elite. Elite group. And they're contributing 30% of the index return on their own. So it's the other 11% of Mag 7 contributions coming from

Joey Loss 7:08

the other 5, but actually it's 6 because Broadcom is now an unofficial part of the Mag 7 in some circles. And they're including it in this data and. But Magnificent eight just doesn't sound as cool as Magnificent seven. So I think Broadcom is just kind.

Adam Van Wie 7:15

Right.

Adam Van Wie 7:22

Of like the shadow God man out. They're forgotten about the guy who's there. A chair at the table late to the party.

Joey Loss 7:28

But they're not going to give him.

Joey Loss 7:32

Yeah.

Joey Loss 7:35

And even with price volatility, the MAG7 grew earnings by 18.4% in Q3. And I just love seeing the words grew earnings by 18.4% because, like, that's the difference between this and any other period. People are trying to compare this to exactly that's.

Adam Van Wie 7:51

This is. That's why it's. That's what I keep saying. It's just not comparable to 1999. You cannot compare the two situations that. It's just so different. It's wildly different. I was there. It was right before I went to business school in 2000 is when all that really kind of went crazy and we were. There were just some wild things being taught in business school. I literally went to like a finance class where they were teaching alternative valuations based on number of clicks on a web page. And it was like, this is ridiculous. Like, what are they? This is business school and this is a good school. I went to a top 25 school. That's what they were teaching. It just in hindsight, the amount of crazy things that were happening back then, I mean, pets.com was like they just slapped a.com on the last. On the last name of their URL and like. Or in the last part of their URL and suddenly they had this insane valuation. Because VCs were honestly willing to throw money at anything that had an online presence. It was just nothing. Like today. None of those companies, a handful of them, had any revenue and none of them had profit. And today is just the total opposite of that. These companies are just making more money than we maybe ever thought possible.

Joey Loss 9:13

Yeah. And they're clearly, like, in Nvidia's case, they're immediately being put to work so that I can gather the data points we're talking about right now in a chatbot. You know, it's just like they're so, so useful. It's not the, the prospect of potential future use, of usefulness, it's like immediately useful.

Adam Van Wie 9:32

Now, all that comes with an asterisk too, because AI is being sold as one thing and we haven't seen that. Like, it hasn't turned into revenue for companies that are producing large language model AI models. And it just hasn't happened yet, not to the level that the market is expecting based on valuations. And so that's where I think you can make the argument that what if that doesn't happen? Then, yeah, those companies are going to suffer. But still, like the Nvidias and the companies that are producing the hardware to make that possible, they are wildly profitable. And so that's step one. Next is to realize that revenue and profit for the actual use of AI products.

Joey Loss 10:19

Yeah, and I really like the idea of just like, it's so hard to decide when which sector is going to benefit from AI or. I know you hate thematic ETFs I also hate them. I've seen an interesting comparison, not a literal comparison, but an interesting, idealistic comparison of this to like the railroad thing where when the railroads came, everybody got more profitable except for railroads. It's like AI might, I don't know, we'll just have to see what this becomes. But could be for now, I mean, it's people like us and all these other companies out there, Salesforce and these and Amazon and the companies that are deploying AI as a use case within their business that are benefiting immediately. OpenAI these other places, they have some revenue. That revenue is growing, but it's not that exciting yet.

Adam Van Wie 11:08

No, it's definitely not. And it's not growing at the rate that Nvidia's revenue and profits are growing. But let's talk about that a little bit. We have employed AI just for internal use. We're not using IT investments or in anything related to that. But we are using it just as note taking and, and summarizing meetings and prepping for, for meetings. It's. And honestly my review is it's amazing. I love it. It's great for research. It's great for such a time saver when it comes to meeting prep and meeting note taking.

Adam Van Wie 11:45

It's definitely helping us tremendously in my opinion.

Joey Loss 11:51

I love it. I mean, just the ability to like it doesn't necessarily change any of what's happening materially. It changes how it gets done. And the way that it gets done is so much cleaner and better for me. You know, as I'm writing a financial plan, our AI note taker, I go in there and I say, hey, what did Bob say about his car replacement timeline? And it will look through the notes and the audio and just give me the answer. And it's like, could I have found it on my own? Of course. But it would have taken me 15 minutes. I'd have to go through a couple different meetings and figure out where did that happen. Instead I get it in 40 seconds and I'm moving on to the next thing. And buy yourself 14 and a half minutes, 600 times a year. You've got hours and hours and hours more time to do the business that you do and provide real value. And I think that's what these companies are looking to do.

Adam Van Wie 12:45

And the other way to look at it is to get the equivalent value. We could have hired someone for $30,000 a year to sit in all of our meetings, take great notes, transcribe them into our CRM and even then the search functionality wouldn't Be there. So then if you could make that request to that person, they could go back and search up for you and, and you could save that time. But would it, is it as efficient as the AI? Not even close. And, and you're paying how much, how many more times for that service than you would for an AI note taker?

Joey Loss 13:22

Yeah. And I think 30 is generous to us. I don't know anybody who would do that job for 30, you know, but like the point stands.

Adam Van Wie 13:29

Yeah. I'm just thinking like, yeah, some low cost person just for note taking like you, you, you're going to pay a lot of money compared to what an AI service costs. Yeah.

Joey Loss 13:42

So it'll be fun to see what happens across the entire market as these tech pieces get more widely adopted, get more capable, get faster.

Joey Loss 13:53

And I think, I think we'll see that continue to translate into earnings potential and earnings growth at a faster pace. If it costs less to do more, how else can it go long term?

Adam Van Wie 14:04

Yeah, I'm excited to see what happens. I think we're really getting close to realizing what the true possibilities, or at least the initial possibilities are for AI. The cool thing about AI or another cool thing is that it continues to grow along with the amount of, I guess, knowledge that it has. So I think you're gonna see different rounds of what it can do. There's gonna be the initial, which is probably what we're in, and then you're gonna see different iterations of that as we, as we move through time.

Joey Loss 14:37

Yeah, I agree with that. And just like it's already seems like a distant prior chapter, but the whole tariff event, just to relive that for a second, you know, mid. I remember early in the year we're like, man, let's go. Another kick butt start. Like mid February, we were, yeah, 5, 6%.

Adam Van Wie 14:59

It was a really good start to the year.

Joey Loss 15:01

It's like nine weeks into the year, we're like 0.8% a week. It just felt great. And,

Joey Loss 15:08

and then the buzzings about the tariffs got a little bit more serious. It felt like, okay, things were coming down the pike, it was going to happen. The market stalled a bit, started to slope down. And then, you know, there was the announcement with the infamous chart of all the countries in their sentence. And what a night. We were just texting from our houses watching that. I remember. And that was just wild. And then the market of course, did not like that. It dropped S and P dropped 11% in two days. The next two days, energy and industrials were hit the hardest Because I think the concern was then all of a sudden, supply chain mattered again. Like, where was your supply chain? It hadn't mattered that much. Leading up to that. And suddenly there's a massive premium for locally run vertical integrated supply chain businesses and, and a big penalty for everybody else.

Adam Van Wie 15:53

No.

Adam Van Wie 16:08

Yeah, it's, it was a, it was a huge shock to the system, which I'm fairly certain was what it was intended to look like. But yeah, I mean, it sorted itself out pretty quickly. And you know, it's funny because I, I was reading through some Market Watch and some other articles about the, the different reports, the economic reports that came out this week because there was some pretty positive inflation data showed it going back down to 2.7% this week. And of course their whole take on it was, you can't believe this, because the government shutdown didn't allow them to collect some of the data. I don't know if that's true or not. I'm not even going to comment on that. But they were still talking about the effect of tariffs. And I was just thinking to myself as I was reading it, like, they are really trying to sell this, but we're just not seeing it like I am. I can't identify cost increases that are due to tariffs in my daily life at this point. And I been like, looking for it and I just don't see it. And the whole article, like multiple articles that I was reading was, was blaming the terrorists for cost increases that I don't even think are real. So it's, it's just this big disconnect. I, I just can't identify,

Adam Van Wie 17:30

like we're not seeing it in the data and I'm not seeing it in my personal life.

Joey Loss 17:35

Yeah. Whatever changes are, I don't feel any different than the kind of changes that were already taking place. You know, whatever the trajectory was, it seems to have for the most part stayed that and

Joey Loss 17:48

the day of recovery. I mean, in hindsight, that week from the 2nd to the 4th, I remember every day looking like at the firm AUM and like headlines and everything and just being like, wow, this is nuts. Yeah.

Adam Van Wie 18:04

And a little brutal.

Joey Loss 18:06

Yeah, it was pretty brutal. But we knew what to do. That wasn't really what made us feel anxious. It was more like, where are we going with this though? Like, it, like we thought, okay, there's got to be some sort of plan that we don't know about. But like, where is this going?

Adam Van Wie 18:20

Yeah, I, I couldn't figure it out and I know we talked about it at length, but I do have an overriding investment philosophy about that, which is politics can, can drive the market in the short run, but they never drive the market in the long run. And that has proven true time and time again. I don't care where you stand, left or right. It's, you know, there's, if the, if Democrats are in power, Republicans are going to be looking for things to blame on them about the economy and vice versa. And so you just have to like, get rid of all that noise and remember that corporate profits drive the market, not politics. And that I think is a great example of. Exactly. I think this year is a great example of that philosophy playing out.

Joey Loss 19:14

Yeah. And in meetings you talked a lot about, I mean, I don't know how many times we have this conversation. Companies just want to know the rules because once they know the rules, they know how to figure out how to make money. And at the end of the day, it's that incentive structure that makes investing worthwhile over the long term. Because you know that that's what every one of these entities is trying to do. They want to create something or deliver some service that is going to be beneficial to people in such a way that they will give them more money than it costs them to do it.

Adam Van Wie 19:43

That's why, that's why this game is rigged in your favor. It's the only one that you, you have that, that incentive structure on your side. And if you know that and you believe in that, it will pay out in the long run. And it's proven over 100 years that that is the truth.

Joey Loss 19:59

Yep. And so by after that long week, which it still feels so much longer than just one week, it was April 9th, and I guess it has the nickname the Two Hour Miracle. It was President Trump posted on Truth social announcing a 90 day pause on reciprocal tariffs for most countries, moving to a 10% base rate.

Joey Loss 20:21

Meanwhile hiking the Chinese tariffs to 125%. I remember that too. And moving on.

Joey Loss 20:29

But the market surged 7% in that two hours. And during that two hours, you, your dad and me were all standing in your office with their jaws on the floor like, what is this market?

Adam Van Wie 20:39

Never seen anything like it.

Joey Loss 20:41

Probably won't again.

Adam Van Wie 20:43

No. That was insane.

Joey Loss 20:44

I'm glad we were all there.

Adam Van Wie 20:46

Yeah, definitely kind of a moment that we'll probably remember. It's kind of tied to the start of this business. So it was definitely good. It was a good thing to have happened at that moment.

Joey Loss 21:00

Interestingly, that was only the third best single day for the S P since World War II.

Adam Van Wie 21:05

That's crazy. What were the other two? I don't even know.

Joey Loss 21:09

It doesn't say. I didn't gather that. Probably should have, that should have done that question.

Adam Van Wie 21:14

We can look it up, talk about it on the next episode.

Joey Loss 21:18

But the Dow that day during the two hour was moving at a rate of 25 points per minute.

Adam Van Wie 21:24

Jeez.

Joey Loss 21:27

It's higher than the speed limit next to my house.

Joey Loss 21:32

Yeah. Well, okay. Well, that was, that was fun. I just wanted to kind of walk back through that. And obviously since then, the market has figured out what the rules are. The tax law passed July 4 and the rules of the game are clear. Companies are back to doing what they like to do, which is making money. And the rest of this year has really been in just a tale of what happens when clarity resumes.

Adam Van Wie 21:54

Yeah.

Joey Loss 21:54

And what they do.

Adam Van Wie 21:56

And the, it's, I remember so many years where tax law didn't get clarified until late December or sometimes early January. And you're just kind of like, what do I do? I don't know what to do. Just tell me what to do. And because, you know, Congress just always takes forever to do everything. So having that clarity in mid summer was just such a gift for people in our industry. Yeah.

Joey Loss 22:22

And one thing that happened, this also came up a lot, you brought it up in meetings was the bonus depreciation thing I think was a real spark definitely for businesses. You want to share about that?

Adam Van Wie 22:34

Yeah. In fact, I, I found this article that I was going to talk about on the radio this weekend. But the one thing that we had heard about from some of our small business owner clients is that part of the new tax law allows you to depreciate capital goods in year one of when so basically expand expense huge items in year one, lowering your, your taxable income. And so we had heard about this with one, one particular client who happened to want to buy a corporate jet and was spurred to do that by the tax law change. Well, it turns out that, that he wasn't the only one. Corporate jet sales are up 11% in the last year. I just found that data point that I was going to use for our show this weekend and that's. And they're up 30% from the year before that. So that's a huge jump in two years. And I think some of that is due directly to that tax law change. So if it's happening and things like, like corporate jets, think about other capital equipment like manufacturing plants and things like that, it's just a game changer when it comes to How a corporation is going to think about investing in their future, especially if they can realize all the benefit of that in, in the year that they're making that decision, it's going to pull forward a lot of that decision making.

Joey Loss 24:04

Yeah. It allows people to basically bring more cash to close on big capital expenditures because they're not going to get, they get so much more tax benefit now that they can go ahead and figure out what does that mean for our tax bill later, Apply some more cash to the deal, get it done, smooth out cash flow now and later. I mean, it's just great.

Adam Van Wie 24:23

Yeah. And the reason that that's so important is all of that just creates more economic activity for every piece of capital equipment that is made. Yes, it benefits the company that's selling it, the employees of that company, but also all the ancillary benefits of that transaction. So maybe there's some financing involved that gets more economic activity at the local bank or the lending institution. And then there's just so many ways that that affects everything else. Plus once you install that piece of capital equipment in the, in the example of a manufacturing plant, then you're hiring more people to run that machine. And so you're. It just keeps going on and on and creates this like virtuous cycle. Yeah.

Joey Loss 25:06

And so for 2026, I think we're going to see a bunch more tax benefits turn on. At the personal level, I don't know that anything else business wise is changing. Does anything.

Adam Van Wie 25:15

Nothing that I had noticed. That doesn't mean there isn't anything but nothing that jumped off the page to me.

Joey Loss 25:21

Yeah. On the personal side for listeners, if you give a little bit of money here and there to church or to other charitable organizations, historically with such a high standard deduction, it hasn't really meant anything to you on your tax return. But per individual, you can deduct $1,000 now above the line, meaning doesn't matter how you file, whether it's standard or itemized, deduct you're going to get some kind of benefit for giving stuff away that's limited to cash. So if you're doing the goodwill thing, sorry, it doesn't help you. I was disappointed as well. But any little cash gifts, you know, keep track of them, they're worth something now.

Adam Van Wie 25:56

Yeah, that's a big one too. That's, that's a really nice deduction because so many Americans are charitable and give money every year. And the, the fact that you lost that deduction when the tax law changed in 2017, not you didn't actually lose it. They just raised the standard deduction so high that it was so hard to clear that hurdle for most people, but now it's kind of back. And I think hopefully that that stimulates even more charitable giving because that's never a bad thing.

Joey Loss 26:24

Yeah. If. If anyone wants to go check out, like I did a full solo monologue, just you and me, about

Joey Loss 26:32

the tax bill in depth. If you want to listen to some other stuff that's in there, there's a whole 30 minutes about it. That's episode 20 came out in July right after the bill has passed. So. Yeah. But no, I think next year is gonna be good. I'm looking forward to it. I feel like all the ingredients for success are there. And without a Santa Claus rally, for whatever reason, my brain just thinks that that's kind of a good sign. A little cooling off before the next year starts.

Adam Van Wie 26:59

See what happens. Totally fine with that. And. And even with the tax law, if you're a senior and you're listening to this podcast, this year, you're probably going to get a higher rebate than. Than you would have normally. That. That new senior deduction, we're seeing it make significant impacts in people's taxes. For people that we've done Planning for from 24 or 25 versus 24, it looks much better in 25.

Joey Loss 27:24

Yeah, it definitely does. Cool. Well, it's nice to have a year in review and look forward to the first market chatter. 2025. It's 2026 and see what's going on.

Adam Van Wie 27:35

Yeah, definitely. I'm looking forward to it, too. And happy holidays to everyone. I hope you all have a great new year and a really good Christmas or whatever other holiday you celebrate.

Joey Loss 27:44

Awesome. Yeah. Thanks, everybody for listening. Take care.