Let's get to the big story.
Breakdown.
Wall Street is heading into year-end on edge.
The S&P 500 is up more than 15% so far in 2025, on track for its third straight year of double-digit gains.
Despite a strong year for stocks, the S&P 500 is slipping in December.
Investors are juggling AI spending concerns and uncertainty over when the Fed may start cutting interest rates.
Attention will likely stay focused on the AI trade, which has powered much of the market's gains this year.
Joining me, Peter Tuchman, senior floor trader for TradeMAS.
Trade moss.
All right, the Santa Claus rally is in play.
Give us some insights from your years of experience.
Good morning.
Good morning.
First of all, welcome.
It's good to have you here, Jeff.
So let's just look at where we are, right?
We're in the last couple of weeks of the year, right?
And it's been an extraordinary year.
I know they said we're slipping into December, but to be perfectly honest, you know, when you've got everything that's been thrown at this market.
For the last year, absolutely everything that could possibly be thrown at a market has been thrown at this market.
First of all, a new administration, then you had the mini crash of February, March and April.
Then you had that independence Day, then you had tariffs, right?
And then you had sort of a questionable summer with, you know, a couple of global wars or a lot of the question around interest rates and how that was going to pan out.
You had that sort of uh uh uh you know, sort of.
I don't know, sort of argumentative narrative between the president and Jay Powell that sort of set the stage for what ended up happening in September.
We had Jay Powell sort of finally pivot himself, you know, from going no interest rates to no interest rate cuts, I would say until starting to, you know, at Davos first and then at Jackson Hole, you know, to say I'm going to cut rates.
Now cutting rates is a function of the fact that the economy warranted it, right?
We know that economic data is what he bases his decision making on.
And then once we The government shut down.
We were playing, you know, we were shooting in the dark, right?
We were driving without any GPS at all.
And so, you know what that made it so difficult to do was we did not have the information necessary to cut interest rates with any kind of knowledge.
We didn't know CPI, PPI, the things that Remy and I speak about on a weekly basis.
We didn't really have a sense of what we were, you know, messing with.
One of the other contributing factors obviously to this year was AI, right?
I mean it was obviously the biggest. of the year, you know, the MAG 7 is what was a big factor in what took us, you know, up, up, up, and then, and then it really did go into a bit of a roller coaster, right?
What we saw in November was kind of extraordinary, right?
What we ended up seeing in November was the fact that Palanttier earnings came out.
They were spectacular.
7 days leading into Palantir earnings up until November 3rd, we had record highs.
The stock actually hit a record high, and when the earnings came out, the stock sold off 8% and the Of took the market with it now for some bizarre reason, mainstream media decided to catastrophize this story as opposed to like looking back at history and realizing that you know it's buy the rumor, sell the news.
The old Wall Street days is when a stock would run up into earnings, the stock would sell off as people took profits off that trade, right?
Long term investors kept the trade on, but you know there are a lot of traders in this market, right?
We've seen since COVID 50 million plus new traders involved in this market.
That's a whole New, you know, a renaissance and a new democratization of the trading community.
Those are big players.
The retail trading community has become quite savvy, quite educated, and they're quite good at what they do.
So the fact is that they took the story of Banter selling off at the 8% and Michael Barry jumping in with his comments, of course, all that, and then they decided that this was going to AI was a bubble, right?
And by no means I have a show with Dan Ives, who I'm sure you know that great tech.
Analysts, you know, who said the chances of us not getting an interest rate cut at the end of this year was like the chances of me playing center for the New York Knicks in the 25, 26 season.
You know, it made no sense to think that all the trillions of dollars that was put in by Google, by Meta, by Oracle, and all of those large companies that aren't even in the AI space to think that AI was any kind of a bubble was was kind of nuts, right?
So that sort of gave us that roller coaster through November.
The numbers that we saw in retail from Thanksgiving was spectacular.
So it's sort of a bit of a paradox between great economic data coming out of coming out of Thanksgiving and earnings, and then you've got a lot of the CPI, PPI, a lot of the employment numbers that were a little weaker than usual, right?
We saw that challenger talked about a million people were laid off and we saw a lot of weakness in the economy, which is what Set the stage for the cut that we ended up getting.
We've had 3 cuts, which is very reasonable.
Last year we had 100 basis point cuts that happened over 3 times.
This year we had 75.
We know that Jay Powell is on his way out.
That's just, that's just the way the cards have played out.
Although, to be perfectly honest, he has navigated us through some of the greatest times, in my opinion, whether one likes him or not politically.
You know, think about it.
Through COVID, we're up over 100% in the Dow and the S&P, and that is through every, once again, every possible thing that could have happened to a market.
The market is resilient, you know, it's been, it's been amazing.
We're trading above 48,000 on the Dow.
We're trading above 69,000 on the S&P.
Nasdaq has broken all-time highs across the board.
Gold is.
Gotten to 4400, its record high.
Silver now is the one that commodity that's in play, which is trading at $66 I guess, which is also a way off the top record high.
And so literally that, you know, I think you've got an environment where everyone is confident that buying things that are that are that are holdable, you know, hardcore assets are there to buy.
I mean, I guess crypto is the one thing that's closing out the year, sort of, you know, on the on the tail of its shoes and to the weakness in crypto a little bit.
I can speak to the weakness in crypto.
You know, one of the things that ended up happening in crypto was people need to understand that about around the time of April when crypto was trading in the 860,000 to $90,000 share level dollar level.
Uh, you started to see a lot of regional banks and a lot of larger players get involved in it.
And what ended up happening was the way the crypto markets are traded, they're trading at massive margins, sometimes as much as 50 to 100 to 1.
So as long as it's trading above where they bought it, everything's fine and good.
But when you started to see weakness in the market around the interest rate trade and whatnot, you started seeing a lot of, and there were a number of big trades put on, a number of good trades put on by major whales in in in Bitcoin.
And what that did was it put heavy pressure and margin calls on that, and basically what ended up happening was it also contributed to the sales in Nasdaq and Nvidia because people needed to raise money.
Where were they going to get the money from their best performance of the year.
So what you ended up happening was, you know, that sort of I think is what really contributed to the torching of Bitcoin.
Do you think the markets trust the inflation numbers coming out in the data right now?
It's a really good question.
What's important to note about inflation is that we started at 8.5%.
We've made it down to 2.5%, and I know that that was sort of an arbitrary number that Jay Powell said he was going to get us to 2.
It didn't make sense to me as far as I'm concerned.
It's not a matter of where you're coming from.
It's not a matter of where you get to, it's where you're coming from.
And the fact that we were able to navigate this market from 8.5 to 2.5, my gut is we should have spiked the.
Football called it a win and gone on with our day.
As opposed to coming up with this erroneous number.
What, what does 2% mean?
I don't know.
But you know, look, at the end of the day, you're here on the market with me and we're trading this market.
The people who are trading the market are more like the 1% of the 1%.
Middle America, you know, there's a point in time where the stock market and the regular economy are sort of bifurcated in a way economy exactly.
And so what you end up happening is those are not the people, the people who are living paycheck to paycheck, people who are really feeling the inflation numbers are not the people who are buying the market.
And so that's kind of where you have a little bit of a difference as far as that goes.
But at the end of the day, I think we close out the year super strong, even if we close the market today.
At the levels we're at, the market has been a great year.
Oh yeah.
Going into the 1st quarter, what's your sector pick?
You know what, I can't really pick a sector, and I think it's going to be really a function of what happens with interest rates.
I think we're going to start to see, as you look historically, when you have a double digit year, especially 3 years in a row, January tends to be a little bit softer.
People are trying to position themselves.
What we did see in the last part of the year was that a lot of the big players are in very interest rate sensitive portfolios because we saw that the minute that The interest rate probability spiked down to 15%, which was which was an odd sort of a strange move.
The market sold off aggressively as it rallied up to 88%.
We saw the market rally aggressively.
So that kind of gave us a green light into what most people, most of the big players, the funds, family offices or whatnot, are in those kind of positions.
And so my gut is you're going to see, you know, whether it's the banks or whether, you know, look.
You just made me think of something.
What comes out of this AI trade for the most part, what we're really learning from from Jensen, godfather of AI, is that the one thing in the trade that we haven't really focused on is energy.
Yes, we've put billions of dollars into in building data centers and all that stuff and obviously this $1 trillion into going into Capex on the whole, on the whole future and the demand for AI and GPUs and all that stuff is the bottom line is how are we going to run these things.
You know, I think the biggest one to watch is going to be nuclear, right?
Maybe perhaps even solar, right?
I did an interview recently with a guy who is a runs a magazine here called Payload.
It's about space, right, and talking about the SpaceX IPO and talking about perhaps even building data centers in space, right, which is going, look, at the end of the day, how are we going to run the data centers?
That's going to be the key.
Great to have you on the show.
Happy holidays.
Happy New Year.
Great to have you.
Looking forward to another great year.
Happy trading, everybody.
Good luck.
