The S&P 500 (VOO) Did Something It Hasn't Done Since the Late '90s, and Now It's Getting Close to the Ledge

24/7 Wall St. Key Points:

• With its high valuation—between 27 and 28 times earnings—the S&P 500 (NYSEARCA: VOO) becomes more vulnerable to a 10-15% fall under possible geopolitical or economic events.
• Particularly if the Federal Reserve moves to once again increase rates, persistent inflation, lingering around 3%, and a possible reversal of rate cuts might throw off markets.
• Economic protectionism and tariff policies could aggravate inflation concerns, hence driving the Fed to tighten even more and causing notable market sell-offs.
• As good as the S&P was in 2024, The Next Nvidia stocks did even better, and 2025 is gearing up to be even better. Click here now to see what all the excitement is about.

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Transcript:

[00:00:04] Lee Jackson: Okay, let’s do, back to back 20 percent plus years on the S& P 500 and, you know, are we getting close to the ledge?

[00:00:13] Douglas McIntyre: Okay. So you’ve got back to back 20 percent increases in the S& P 500. I don’t even know if people remember the last time that happened, but it’s, it’s

[00:00:25] Lee Jackson: I actually know when it was.

[00:00:27] Douglas McIntyre: Okay,

[00:00:28] Lee Jackson: It was a stretch in the late 90s, like 96 through 99,

[00:00:33] Douglas McIntyre: got it. So, so

[00:00:35] Douglas McIntyre: back to the issue of, and I always look at this on a PE basis myself,

[00:00:41] Douglas McIntyre: Is the S&P so rich that it only takes a small amount of really bad news to knock it down 15 or 16%. So what do you think about that?

[00:00:54] Lee Jackson: Well, I think you’re right. And, and again, Wall Street is perpetually bullish. I was a Wall Street sales guy for 20 years, you know, and they rarely, rarely, with the exception of a very, very few people. We’ll come out and say, Hey, things are getting a little pricey, but some are starting to say that. And yeah, trading up 27, 28 times earnings that just can’t last forever.

[00:01:17] Lee Jackson: And, I suspect, especially with the change in the administration that, you know, we’ll, even though there are a lot of positives with the new administration, you know, change usually at some point brings on a sell off and we haven’t had a 10 percent sell off. In nine months, 10 months. And yeah, I think we could get a big one.

[00:01:38] Douglas McIntyre: Well, I, don’t like to speculate, but I will anyway. If, if the tariff plan plays out, if you, if, if America basically becomes a fortress, a tariff based fortress, particularly if it’s China, Canada, Mexico, I can see the market getting hit pretty hard just in anticipation of a That we go back to eight or nine percent CPI.

[00:02:06] Lee Jackson: And another thing that’s lurking is, you know, the speculation last year was like, Oh, they’re, they’re gonna, they were going to lower rates, you know, six times last year, and then they were going to lower rates five times this year. That ain’t going to happen. That is not going to happen because the inflation will not go away.

[00:02:24] Lee Jackson: We’re still hovering around 3 percent and have for like the last six months. They can’t well, they don’t have another meeting until May after the Jan meeting, and I don’t think they’ll raise rates until then, if they do then. And now it’s just looking like there’s going to be 2 rate cuts this year, and we’re already below the median fed funds level of 4.

[00:02:56] Lee Jackson: 6%. We’re below that now. So, you know, people looking for 0 interest rates again are going to be in for a big surprise. Thank you very much.

[00:03:03] Douglas McIntyre: I think it’s going to go the other way. I think if you get a major, if you get a major effect of tariffs on the economy, think the Fed may have to basically throw the car into reverse.

[00:03:14] Lee Jackson: If inflation starts to take back up to four or five percent, they’re going to have to raise rates again. And boy, what will that

[00:03:22] Lee Jackson: Yeah, I mean, I mean, that’s what you’re saying. Yeah,

[00:03:24] Douglas McIntyre: now what

[00:03:25] Lee Jackson: going to have,

[00:03:26] Douglas McIntyre: the stock market if the Fed starts to talk about raising?

[00:03:30] Lee Jackson: Yeah, if they pivot and even, even mention they pivot, you know, and it’s pretty clear now, you know, Powell’s going to stay through his term. You know, Trump’s not going to talk him out of it. You’re, you know, talk him out the door. But. You know, they made huge mistakes that leaving rates low for so long was just ridiculous, you know, and, you know, ostensibly rates were low from, from the end of the rate financial crisis, which was 2009 until, until, until recently they did, they started going back up again because remember they tried to raise them in 2018 and the, you know, big market tantrum and then, okay, okay, well, we’ll move them back down.

[00:04:13] Lee Jackson: It’s like, Because now, apparently, it’s not about, you know, maintaining the economy and their actual charter, but it’s about keeping Wall Street happy.

[00:04:23] Douglas McIntyre: Yeah, I agree.

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