Is the “Santa Rally” Cancelled This Year?
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Is the stock market experiencing a downturn or an opportunity?
Stocks are falling, but is this an opportunity or are we going lower? Motley Fool Money starts now.
Everybody needs money. That's why they call it money.
From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoi. I'm joined by John Quast and Emily Flippen. There's a lot going on in the market right now. The stock market, S&P 500 down about 6% since its high in late October. I want to get a pulse on what is going on and ask the big question, is the top for 2025 already behind us? Look, there's a lot of data coming in. We've been talking about artificial intelligence all year, tariffs. But restaurants are weak. Consumer spending is struggling. We're hearing more and more about layoffs. Housing isn't necessarily affordable. Emily, have we seen the top for 2025? Is there not going to be this Santa rally that we talk about?
How should investors be thinking about this moment right now?
For so many investors, it probably feels like reality is catching up to the market because there's been this difference between how investors and consumers have been feeling versus what the market has been experiencing. It does feel like, to me, with so few trading days left in the year, that it's unlikely that the market could go higher from here, given all the headwinds that you just mentioned. One of the companies that I follow pretty closely is a business called Paycom. They manage payroll processing. They reported earnings earlier this week. But one of the things that Paycom noted is, obviously, as a payroll processing company, they depend pretty heavily on how many times companies are processing their payroll.
So if companies are going through stuff like layoffs, that has a tangible impact on their business. And they're seeing that firsthand as companies go through these late layoffs into this part of the year. We talked about it last week on the show. But employers typically don't like to lay people off this late into the year because it's a bad look to do so during the holidays. But this year tends to be or seems to be the exception. And even Paycon themselves are going through the process of laying people off. And it seems like AI is this broad excuse for why people are doing that. It's kind of like, oh, well, we're automating. But in reality, I have to wonder how much of that is actually true. If there already wasn't a lot of influx of hiring coming out of the pandemic, and if companies aren't already looking to just kind of cut costs right now, it seems like given the economic environment we're living in, it makes a lot of sense that layoffs are happening right now.
We probably haven't seen the worst of tariffs. Inflation is still a big question mark. And heading into what seems to be a potentially weak holiday season, I'm not surprised at all that the market is finally down.
It's interesting you mentioned tariffs. One of the comments that I continue to see in earnings calls is, this was the first quarter that we really saw the full impact of tariffs. Emily, I want to get your quick thoughts on it. This reminds me of the moment you change CEOs. You fire the old CEO and the new CEO comes in, and they just do all of the bad things that the old CEO wanted to do, but maybe it The holidays were coming up or whatever, and it kind of gives an excuse to sort of clean the slate. Is that maybe a way to think about this is that AI is kind of an excuse to say, you know what, we really wanted to cut our workforce by 10%, but we didn't have a great excuse, and now we can kind of blame AI?
Yeah.
Yeah, these quarters of everything and the kitchen sink, let's just throw all the bad news off at once. But the problem is that I don't feel like the bad news is all encompassed in these quarters. I actually feel like it's more this trickle-true thing, where I'm getting a little bit of the bad news. And if it was a case where we're blaming AI and we're getting it all done in the third quarter. And then fourth quarter is going to shape up to be a lot better. I would agree, Travis, but I actually a little bit worried that we're going to see a continuation of this, not just in the third quarter results that we've for the most part already seen, but through the fourth quarter and maybe into the first quarter of next year as well.
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Chapters
8 chapters
1
Is the stock market experiencing a downturn or an opportunity?
0:05–6:13
2
What signs are the bond markets showing about economic risks?
6:13–11:39
3
How is the streaming industry evolving in the current market?
11:39–17:46
4
What investment strategies should be considered during a market drop?
17:46–22:18
5
How should investors interpret the recent layoffs in various sectors?
22:18–27:17
6
What are the implications of AI investments on company valuations?
27:17–31:36
7
How are consumer spending patterns impacting stock performance?
31:36–36:21
8
What stocks are currently on the radar of the hosts?
36:21–40:19