January 31, 2025
This quote and rallying cry for US Navy recruitment posters in World War I pictured here, is claimed to have been Admiral Farragut’s order during the Battle of Mobile Bay during the US Civil War. From www.WarHistoryOnline.com, on August 5th, 1864 the USS Tecumseh hit a torpedo, blew up and sunk instantly: “At this moment Farragut made a decision to run the entire fleet through the minefield, thus avoiding the fort cannons. He has estimated that the torpedoes, even though one of them had just sunk USS Tecumseh, were submerged for too long and that most of them weren’t effective anymore. It is claimed that he gave the order: “Damn the torpedoes, full speed ahead,”… His gamble paid off and his ships were unharmed.”” I see the current worry about President Trump’s tariffs to the markets as the long-submerged torpedoes. The media has been filled with conjectures over when, what, where, why and how much they will be. Damn the tariffs, Earnings ahead…
With US stocks helped by interest rates staying range bound (remember I continue to believe rates will stay in the 4%’s range for longer than many think), many economies globally flat or worse which is deflationary and latest unemployment trends remain steady per the US Bureau of Statistics, the primary risk to me today is not tariffs but earnings disappointment. Zack’s Earnings Report places S&P 500 earnings estimates for 2025 slightly ahead of 2024 earnings. Stock valuations are often based on growth trajectory so if a stock is currently trading at 25 times earnings based on growth of 20%+ and then increases earnings by only 10%, it’s still an increase yes, but the trajectory has decreased usually resulting in sell off. Thus, to me, US corporate earnings forecasts are the most important variable for navigating through the current ‘minefield’.
So, for the next two quarters do NOT get caught in daily ups and downs, as I believe the markets will overreact to good and bad news in the 2025 H1 as people attempt to glean any hint at future trends. With attractive rates on cash and volatility potential, I encourage keeping some extra cash available in portfolios to buy long-term potential amidst short-term panics.
Please contact me at your convenience with any questions or to discuss your portfolio or situation in more detail. I wish you a joyful weekend.
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