What we need to offset inflation and expensive stock valuations … will Trump deliver? … expect volatility to remain … how short-term options can mean big returns overnight
We think the combination of pro-growth policies, still-low inflation, continuing rate cuts, and AI-driven economic tailwinds will propel stocks broadly higher in 2025.
That comes from our hypergrowth expert Luke Lango.
Of the variables Luke identified, we’re focused on “pro-growth policies.”
That’s because they have the best chance of mitigating the biggest threat to your portfolio value in 2025 – reinflation.
On Wednesday, Federal Reserve Governor Michelle Bowman said that inflation progress has “stalled in recent months” and “remains a concern”
Looking at the data, it’s easy to agree with her.
The last handful of months of core PCE inflation (the Fed’s favorite inflation gauge) have been flat or slightly higher on a month-to-month basis:
May: 0.1%
June: 0.2%
July: 0.2%
August: 0.2%
September: 0.3%.
(The October reading arrives next week.)
The Fed isn’t going to raise rates to deal with this. We’ve begun a rate-cutting cycle, and a U-turn now – even the hint of a U-turn – would be like tossing a grenade into the economy.
The answer is growth, and lots of it
If we want to help hurting Main Street America… and ease lofty stock valuations via real earnings growth… and offset inflation … then the answer is simple:
Grow like crazy.
Specifically, outgrow inflation.
Former U.S. Treasury Secretary Larry Summers had a great one-liner when asked about any advice he’d give President-elect Trump:
We need to be able to build, baby, build in the United States.
Here’s more from MarketWatch:
[Summers] argued there were too many barriers to constructing data centers, energy production facilities and electricity transmission systems to help power the AI revolution and new green technologies.
“These are potentially complex and risky technologies, and the government needs to, less by law than by moral force, establish close connections where real experts within government who are closely monitoring and following developments” in the sector, he said.
The hope is that Trump will enable “build, baby, build” by following through on his campaign trail proposals to “deregulate, baby, deregulate”
From Thomson Reuters:
President-Elect Trump has the potential to impact a wide range of policy provisions, from the economy to a raft of regulatory rules and directives…
The regulatory landscape under Trump is also expected to see significant shifts. Deregulation would be a key theme, affecting sectors from energy to finance…
As we discussed in the Digest at the start of the week, in a rosy scenario, Trump tax cuts and deregulation increases demand for goods and services… business investment increases… hiring increases… wage growth increases… so, overall productivity skyrockets.
No, prices wouldn’t come down (they’re entrenched at this point). They might even climb again. But in this ideal hypothetical, growth-based wages and economic opportunities will rise to offset higher prices and inflation, and then some. So, the net, felt effect is positive.
But for this to happen, it’s all about growth. That’s how we spike the punchbowl and keep this party going in 2025.
Without this growth, stocks are left with dangerously high valuations
For a sense of this, let’s turn to Eric Fry’s lead analyst in Investment Report, Thomas Yeung:
[The result of the run-up in the market] has been a surge in average valuations – a fact Eric and I have been highlighting over the past several weeks.
The Shiller PE Ratio, which averages earnings over a 10-year business cycle, now sits at 37.0, its highest level since the heady days of 2021.
When the Shiller PE Ratio was last at this level in December 2021, stocks tumbled 19% over the following year.
The Shiller PE has climbed since Thomas wrote this. As I write Friday, it’s up to 37.95.
The chart below, dating to 1860, will give you some context for how extreme this level is.
Will Trump’s pro-growth policies create an earnings explosion that gently lets the air out of this overinflated balloon? We’ll find out beginning next year.
If not, today’s lofty valuation increases the likelihood of volatility – stocks roar on good news but drop sharply on not-so-good news.
Now, while such an environment is tough on long-term investors, it’s a dream for traders.
This brings us to master trader Jonathan Rose and how he’s trading volatility today
Jonathan is the lead analyst at our corporate partner Masters in Trading. After spending 25 years learning his craft on the Chicago trading floors and inside private investment firms, Jonathan now offers up live trading ideas, market commentary, and trading education each morning.
This week, we’ve introduced Digest readers to how Jonathan is trading short-term options. This includes zero-day options, which expire on the very same day they’re issued.
As we detailed yesterday, zero-day options can be incredibly lucrative, potentially rewarding traders with quadruple-digit returns – sometimes in just hours. But for this to happen, it requires big moves in the underlying stock. Translation, lots of volatility.
Jonathan believes today’s market is ripe for such moves:
I’ve been hammering one point home all week… All this short-term volatility isn’t going anywhere. And with volatility remaining elevated, we have many ways to capitalize on whatever the markets throw at us.
One opportunity on Jonathan’s radar comes from QQQ, which is an ETF that tracks the Nasdaq 100 Index:
Take a look at the daily chart below.
The $500 mark is standing out as a critical level right now. After QQQ hit a high just above $515, it pulled back, but it’s consistently found support right around that $500 area.
This isn’t just a coincidence — it’s where buyers and sellers are battling it out, making it the key level to watch.
Why does this matter?
Because levels like this often act as a launchpad for the next big move.
If QQQ holds above $500, we could see another push higher. But if it breaks below, we could be looking at some serious downside action.
Either way, this is where opportunity lives, and this is why we trade short-term options like 3DTE, 2DTE, and even 0DTE — to move fast and capitalize on these shifts.
If you’re less familiar, “DTE” stands for “days to expiration” which circles us back to the short-term options trades I highlighted a moment ago.
If this world of short-term options trades is new to you, you’re invited to join Jonathan this coming Tuesday at 11 am ET
That’s when he’ll be broadcasting in real time, demonstrating how zero-day and short-term options work. This will be a live, one-time-only event.
Now, if options make you nervous, I get it. They have a questionable reputation. But I’d encourage you to join Jonthan so you can see for yourself why that reputation is unfair – and why these short-term options can be so powerful, both for protecting and making money.
On the “making money” side, let’s return to Jonathan and the QQQ set-up he just identified:
We’ve seen this play out before.
Earlier this year, during a similar setup, I highlighted a key level in our live class. Members positioned themselves using short-term puts ahead of a market pullback, and when the QQQ dropped 2.4%, our model portfolio saw gains as high as 179.9% overnight.
This is what it’s all about — being prepared, staying disciplined, and taking advantage of these moments.
Tuesday’s live event is all about helping you understand how these options work… the market conditions that increase the chances of such triple/quadruple-digit overnight returns… and the right way to avoid taking unnecessary risk.
On that note, here’s Jonathan:
A solid fundamental understanding of the market, the strategic use of options, and disciplined risk management forms the cornerstone of successful trading.
My career on the front lines of the exchanges has shown that these principles, when applied systematically, can offer major advantages, even in volatile markets.
Coming full circle, “growth” is emerging as the primary driver of your portfolio in 2025
If we get loads of it, our inflation and valuation problems shrink.
If we don’t get it, we’re left with a very expensive stock market. And that could mean major fireworks.
But that just points us back to Jonathan and how he trades unpredictable markets. We hope you’ll join him on Tuesday to learn how to put volatility in your corner.
Have a good evening,
Jeff Remsburg
