Don't Be a Grinch; Keep Holding

In this podcast, Motley Fool analyst Jason Moser and host Dylan Lewis discuss:

• How some profit-taking and tax loss harvesting caused a bit of a holiday hangover for the market to close 2024.
• Why mounting consumer credit card debt and delinquencies might finally start to eat into discretionary spending in 2025.
• Alphabet‘s agenda for the new year: AI, Gemini, and Project Mariner.
• A few resolutions to ring in the new year.

To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our beginner’s guide to investing in stocks. A full transcript follows the video.

This video was recorded on Dec. 30, 2024.

Dylan Lewis: Did the Grinch steal a rally? You’re listening to Motley Fool Money. I’m Dylan Lewis, and I’m joined over the airwaves by Motley Fool analyst Jason Moser. Jason, thanks for joining me.

Jason Moser: Dylan, happy to be here, closing out a an interesting year and getting ready to kick off a new one.

Dylan Lewis: It’s that nice short week between Christmas and New Year’s where news cycle is a little bit slower. We get to spend a little bit more time with some of the stories, maybe a little bit of time with people that don’t have anything to do with work. Did you have a nice holiday?

Jason Moser: Yeah, It’s a very busy time for our household. We’ve got a lot going on in a 10 day stretch, so we’ve got a couple of birthdays, a wedding anniversary, Christmas New Year’s. It’s a lot crammed into one holiday, but so far we’ve gotten through it unscathed and everybody seems happy. How about you?

Dylan Lewis: Can’t complain, I had my fair share of holiday drinks, had my fair share of family time. I’m back home and very happy about that. Honestly, the stock market, maybe like some of us that are now back at home after some holiday travel, dealing with a little bit of a post holiday hangover. We have the S&P 500 down about 2% since Christmas. What happened to the Santa rally?

Jason Moser: Well, it’s not unheard of for some selling to occur toward the end of the year. We see investment firms cleaning house, investors cutting away losers, taking advantage of some tax loss harvesting. It’s not terribly uncommon to see a little selling going into the end of the year. I think it’s interesting for me more to think about going into 2025, there’s still some uncertainty. We have a new administration getting ready to take over here, I think, on January 20th, and there are a lot of questions that remain in regard to exactly what they’re going to pursue, what they’re going to prioritize, what our interest rate policy ultimately looks like. We’ll obviously get to a story here in a little just in regard to the state of the consumer, which I think leaves us with a lot of questions. Let’s not forget. It’s been a really good year for the market. I think the S&P, right now, year to date, the total return somewhere in the neighborhood of 26, 27%. That is absolutely nothing to sneer at.

Dylan Lewis: As you were wrapping up the year and checking in on your brokerage account, your portfolios, did you do any end of year tidying up?

Jason Moser: I have not done that. I typically don’t do that. I try not to overreact. For me, I am going to be making some sales here. I’m going to making some sales here in the coming months, I guess, as I shore up just some final college tuition funds. But on the whole, no, I’ve been focused a lot more on my winters and trying to spot opportunities to add to them while just that old saying. You water the flowers and you pull the weeds. I’ll pull those weeds eventually, but thankfully, I don’t have a ton.

Dylan Lewis: It’s always a good thing. Only changes for me was upping what I can contribute to my 401K on a paycheck basis, making sure that I’m hitting that new match thanks to the IRS up $500. But otherwise, keeping things steady as they were.

Jason Moser: Wait, you get to be my age, Dylan. Then you get to take advantage of those catch ups. Can’t complain about a catch up.

Dylan Lewis: We will get there eventually. That’s 31,000 a year. If you’re over 50 for the folks listening and a little PSA. You still have time to make that change for that first paycheck of the year, if you’re interested in doing that. Let’s hit that credit card consumer debt story that you mentioned. This is a story we’ve been following for a long time, and we in particular have been talking about quite a bit on the show. American budgets being tight, inflation, higher interest rates, really straining the consumer and how much money is available for discretionary spending, it has felt like for such a long time we are in bend, don’t break territory. Are you confident that holds for 2025?

Jason Moser: Well, I’m not partly am and partly not and what I mean by that is what we’re seeing is a tale of two economies here. It’s one where higher earners are doing OK, but it’s the lower earners that are finding themselves in a real bind and we were talking about the story that we saw in the Financial Times earlier in regard to just lenders writing off credit card debt. They’ve written off a $46,000,000,000 in seriously delinquent balances for the first nine months of this year, that’s up 50% from a year ago. When they say seriously delinquent balances, that generally refers to debt that’s 90 days or more past due. But what we’re seeing, for the most part, is that higher earners are still doing OK. The personal savings rate of four and half percent, that is flat from the same time a year ago.

But it’s worth keeping in mind that is weighted more toward higher earners. The lower third of consumers here in the US, according to this report, essentially have no savings at all and I think that’s where we start to get a little bit more concerned because you said it the key phrase, their discretionary spending. That’s something that will be impacted by this, most likely, if these numbers are accurate.

Dylan Lewis: One thing that strikes me, processing all the data from the holiday season that’s coming in is it doesn’t seem like this has yet affected what people were doing at the stores this December and late November. I think we saw the National Retail Federation say that holiday spend was estimated to be just shy of one trillion, a new record for the year. Saw a data point that a third of consumers have taken on debt during the holidays. A lot of the data we’re looking at for this story is November and backwards. It’s not really incorporating the heaviest part of the December spend, which I mentioned, Jason, say, I’m concerned that we are going to be seeing this problem get a little bit bigger and a little bit bigger as the months go.

Jason Moser: I think that’s a reasonable assumption. I always say never underestimate the American consumers ability to behave irrationally. If we’re all tapped out, we’ll find ways to get it done and there are more tools in our system now for folks to spend money. Now it’s not just credit cards.

That whole buy now pay later market that has grown considerably since PS being introduced just several years ago. But I think it’s going to be really worth paying attention to. When we see these banks announce report earnings here in January, we’ll see the big banks, JPMorgan, Bank of America, companies that really do play a big role in a lot of these credit card lending businesses. It’ll be worth paying attention to see their take on it, looking at the numbers as far as writing down the seriously delinquent debt. That could give us a little bit of an idea of what maybe we could expect here in this coming year because those are big numbers, and we know that overall credit card debt in the US is well over $1.1 trillion now, which is all time highs. Again, it’s OK for your higher earners, but we are definitely seeing those lower earners, really start to feel stretched.

Dylan Lewis: Going to that idea of the bifurcated consumer, where you have high earners generally doing well, lower income earners struggling a bit more, do you see that playing out with retailers and basically it being dependent on who their audience is for what results might look like for 2025?

Jason Moser: I think that’s what we have to keep an eye on. That’s the first market that really comes to mind. It’s just general retail but discretionary spending. You’re going to see pockets where some continue to perform well. Companies Lululemon is one that stands out to me that even in a period like this one and they do favor sort of the higher price point. They might fare well or at least get through this OK because their customer is a little bit more toward that higher earner class. But definitely discretionary spending in general, I think, watching the performance of companies like Target and Walmart and hearing their language on these earnings calls in regard to the state of the consumer, because we’ve certainly seen a lot of the higher earners also start focusing more on value in shopping at places like Walmart and Target that are so good at offering that value.

Dylan Lewis: That’s our sneak peek at the consumer for 2025. Maybe not the most optimistic view, but I think one worth paying attention to. We also got a sneak peek at what Alphabet has in store for the New Year. CEO Sundar Pichai giving a strategy meeting with his team ahead of the New Year and a little bit of preview of things to come the major themes from the news outlets, Jason. This is a disruptive moment with AI. We have mounting anti trust pressure. Which of those two do you want to dive into first?

Jason Moser: Well, I think AI is probably the one that interests people more. The anti trust stuff is probably going to drag on for a while, and we’re not going to ultimately how that all works out because it feels like there’s going to be a lot of litigation involved there. But going back to that market performance, these last several days of the year and going into 2025, we’ve seen just such a tremendous amount of spend on AI from companies all over.

It’s becoming a little bit more imperative that they actually show that they actually prove to us exactly how AI is going to make our lives better and it certainly seems like alphabet. It seems like they are really taking this very seriously, calling 2025 the year where they really need to focus up on it in prove that value proposition, so to speak. I think the early signs, at least in regard to a company like alphabet, and let’s just call it Google because that’s what most people know it as easy. Google, what do we know Google for? It’s search. A big question mark has been how are these large language models, these chat bots, so to speak? How are they going to impact Google’s core advertising business? Is search going to go away? I tend to view it a little bit more as an evolution. I don’t think search is going away. I think it’s just evolving. I grew up in the Day encyclopedia, Dylan, so my version of search back then was me to crack open these 50 pound books and search for the information that I was looking for, as opposed to now, or I could just, you know, hammer in a little search bar, what I’m looking for, and it just comes up at an instant. We’re seeing the evolution, I think, of search.

Search it’s going to do it a little bit differently and it seems like Google is starting to really work on on ways to bring AI into their universe because remember, Google isn’t just search. They have a lot of properties with billions upon billions of users. That is a tremendous competitive advantage, and it gives them a lot to work with.

Dylan Lewis: I think what’s interesting is you could view what we are seeing with generative AI as a humongous existential threat to a company like Google. But you could also look at the way that they are answering it, and they are very clearly spreading their bets across different approaches to how people interact with information. We’ve seen the AI overviews for search in the more traditional sense, where you put something into their search bar.

As part of the search results, you’re getting the AI overviews. We’ve seen them also push this Gemini app. They expect it to be one of the next really big apps for them as a competitor to Chat GPT. They’ve also been pushing a little bit into a gentic AI with their project mariner offering, which is very prototype, very researchy, but the idea is you would have within the Chrome browser, AI agent who is able to do things for you on your behalf, kind of like an assistant and so I don’t think that they are making a singular bet on the direction of getting information. They’re trying to see what the marketplace wants and what users want.

Jason Moser: I think that’s spot on. I think that’s the beauty of it. You’re right. They could look at this AI opportunity as a threat. But I think they’re viewing it as an opportunity. With all of these different platforms, they can find ways to bring value to make those platforms more friendly and easier to use. I mean, as someone who’s gone in there and fiddled around with Gemini, it’s something very similar to a Chat GTP or a GPT, whatever, it all does the same thing.

But you could see them starting to incorporate that functionality, that ability into more of their platforms, whether it’s Gmail or maps or Google Drive or what have you. I think that’s the nice thing there. The other thing to remember too is, I think in regard to AI, this isn’t a Google specific problem. This is something that companies everywhere are really having to tackle. How to bring AI into their businesses, how to bring AI into their business models, and ultimately capitalize from it. It reminds me a little bit of back in the day when Facebook first came public, and we were talking about the challenges for Facebook going mobile. Would they be able to do it? Everybody was so used to using Facebook through that laptop sort of environment there. Again, that wasn’t really a Facebook specific problem either. Everybody was trying to figure out how to tackle mobile because that’s the way we do so much now and so I don’t look at this necessarily as just a Google specific problem.

I think one of the advantages that they do have is they have so many platforms with so many users. They’re going to be able to test and learn a lot. I would be more concerned if they were just spinning their wheels or not really doing anything, but it really does sound like they’re making a lot of efforts to try a lot of things, test and learn, continue on with the things that are working, abandon the things that are not. As a Google shareholder as someone who’s recommended the stock and some of our services here at the full, I’m going to take the glass half full perspective here. I’m going to hang on to my shares. I think that they’ve got something good here. Again, I think another neat thing about Google is, if you go back 10 years, advertising was well over 90% of their business, that’s come down over the years. Now it’s around 75% and so they’re making their money a number of different ways now, and a lot of that comes from subscriptions, and I think they’ll find out ways to monetize things like Gemini and good time.

Dylan Lewis: Jason, it is our final show together for 2024, and we have, I think, as I look at my watch, about 32 hours until the clock strikes midnight here on the East Coast takes us into 2025. That means we have a little bit over a day to decide, how are we going to be better in the new year? I’m curious. What are your resolutions?

Jason Moser: Better as investors or better as people. Let’s try both. I’m going to give a verbal bond here to Tim Hanson because he’s the one that brought this to my attention several years back. He always liked to make the resolution at the beginning of the year to not sell anything and I always just like that perspective, going into that year and hoping, let’s not be too active. Sometimes the best action is in action and so I do like that idea. Now, I mentioned I probably am going to have to sell a little bit here or there throughout the year, just to shore up some final finances for college tuition for my girls.

But that was always the plan. Investing ultimately is a means to many ends. I’m not going to make that resolution this year, but I’m going to try to minimize at least that selling and always keep that at the top of my. I do want to introduce at least three new companies to my portfolio this year as I get older and I start focusing a little bit more on bringing more dividend players into my portfolio. I think I’d really like to be able to introduce three new stocks into my portfolio this year. Then finally, just on a personal note, just trying to be a better person, I can be a pessimist at times. I know that’s hard to believe, but Dylan it’s true.

Dylan Lewis: No, you?

Jason Moser: I want to make a concerted effort to wake up each day on the right side of the bed and keep a positive perspective. I just think it’s more productive. I think it impacts the people around us in a good way and so I’m really I want to continue to make that effort to try to just approach each day with a fresh positive perspective.

Dylan Lewis: Well, you bring plenty of positivity to me here on the show. I’m always happy to be taping with you. I always feel like there’s a sunny disposition coming through and if there’s more of that in our future for 2025, I’m mighty happy about that.

Jason Moser: Well, what about you? You got any resolutions on your radar, anything you’re trying to do as an investor or a person?

Dylan Lewis: I’ve always found that I’m better off when I have a system rather than a wish, if that makes sense and so something like talk to my relatives more does not wind up really manifesting in a very. But if I can do something like, Hey, I want to call a family member or friend once a week, then I tend to have a better chance of having something that works and sticks. I think my resolution is I found this is not investing one, but I have a very good weekly rhythm to the way that I do things. There’s the Sunday shop, big Cook, set things up for Monday through Wednesday. I haven’t found a good daily routine and good daily and I’d like to bring a little bit more stability and structure into my day so that I can be what you were saying before, a little bit more prepared, a little bit more positive, a little bit better to the people around in my life.

Jason Moser: It feels like the daily rhythm was a lot easier when we were going in the office every day. There was there was a pattern, a structure, and it’s a little bit different now when you’re working for home.

Dylan Lewis: If any listeners have suggestions for that daily rhythm for that daily routine, [email protected] is where you can reach out and send those and really, we want to hear your resolutions, too. Money related, not related. We want to know what they are. Jason Moser, thanks for joining me for the final time in 2024.

Jason Moser: Well, thank you. I appreciate it and Happy New Year to all of the listeners. Thanks so much for listening.

Dylan Lewis: As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against so buyer sell anything based solely on what you hear. All personal finance content follows Motley Fool standards and is not approved by advertisers. Motley Fool only picks products in personally recommend to friends like you. For the final time in 2024, I’m Dylan Lewis. Thanks for listening. We’ll see you tomorrow.