Moneybeat: Rifts and recovery

JENNY ROUGH, HOST: Next up on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: Time now to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. David heads up the wealth management firm The Bahnsen Group. He is here now. Good morning to you, David.

DAVID BAHNSEN: Well, good morning, Nick. Good to be with you.

EICHER: Last Monday of 2024, David, so let’s do an economic year-in-review. The former president, now president-elect, won a campaign in part on criticism of the economic stewardship of President Biden, with Kamala Harris trying to run from that record. But 2024, at least, was a pretty decent economy, as measured by the traditional measures, and as we talked about each week. Walk us through the year in review.

BAHNSEN: Well, I think that the economic stories we talked about here on The World and Everything in It throughout the year are the sort of major categories one thinks about when evaluating the economy.

The jobs market holding in there when there were times when people wondered whether maybe unemployment was about to kick higher. Or the impact of two years of Fed tightening was going to weaken the labor market.

But seeing wages grow, including at the bottom deciles of wage earners. Seeing weekly unemployment claims never really get that much higher. The unemployment rate staying right around 4%, which has traditionally been considered full employment. That’s probably the strongest story in the economy for the year.

There are definitely signs of weakening components, and we’ve talked about manufacturing. For all the talk of the investment that’s been made, we think about things like the Chips Act, that badly named Inflation Reduction Act. You know, one can believe—as I do—that there were tremendous problems with some of these legislative acts passed in the Biden administration. But even if you don’t believe it should have been done, or that it was wrongly done, you still generally would expect that there’s going to be some impact from these things. There was, but not nearly at the level that many had predicted. So, will there be some sort of economic improvement in manufacturing, in industrial production, in capital expenditures that drive enhanced productivity?

I think right now the economy is largely relying on enhanced productivity from just the greater technological efficiencies that are happening. That’s the way I prefer it. I don’t believe the government needs to be driving more productivity. I think they need to get out of the way of improved productivity. But regardless, the economy had a pretty good year

There are signs of weakness, and I’m still answering your question in the context of this one year, not addressing the underlying structural issues that are much more important longer term. Which is that in a year of economic expansion and peacetime we are still growing our deficits by $1-to-$2 trillion a year. That’s the fundamental issue, and that needs to be said about 2024 as well. It was absolutely extravagant government spending.

EICHER: How about 2024 in the markets?

BAHNSEN: Well, look, it was a huge year for markets and you’re looking at an impressive performance from a number of sectors besides technology.

Now we already know that technology had another very good year—and that those large names at the top in terms of market capitalization, Nvidia, Apple, Facebook, have continued to ride higher. But it was not a year where technology carried the whole market. The financial sector had a very good year. The utility sector had a very good year. 


So, there was a little bit more broadening out from a sector standpoint, and yet it was still very top heavy in terms of the companies that had big years.

Most risk assets did well in 2024, and then where there were lagging performances in safe assets, things like treasury bonds once again didn’t have a great year. So, we enter 2025 in a very different environment.

EICHER: And then last, David, I know you’re researching for your annual white-paper looking at the year ahead, but give us a little preview of what you expect we’ll be following in 2025.

BAHNSEN: Well, I would divide it up into the categories of trade, taxes, and energy. Deregulation is something that’s going to be a part of trade, taxes, and energy.

In the case of trade, there’s a risk of there being more regulation, not deregulation. Of course, there’s many who voted for President Trump who want that, and so I’ll give that where it is.

The struggle to get a continuing resolution passed do indeed foreshadow that nothing is going to go as easy for Trump 2.0, as many were hoping. I think that was true before the continuing-resolution challenges, but it kind of revealed it now.

But, Nick, here’s something that must be talked about. It broke out over Christmas Day and into the days that followed: a really significant divide within the camp of those who are most enthusiastic for Trump 2.0 around this issue of immigration visas related to workers in the United States, foreign workers in particular. 


The Vivek Ramaswamy and Elon Musk camp that are running his Department of Governmental Efficiency, who were high-profile people—and in the case of Elon Musk, the wealthiest man in world history—taking the stance of that we need more foreign workers of high skills, for the sake of American competitiveness to retain their talents here.

Then on the other side, you have people that are more traditionally associated with online MAGA and kind of behind-the-scenes provocateurs. President Trump is going to have a lot of opportunity to have to pick between competing factions within MAGA.

I’m not talking about picking between left, right and moderate, which all presidents have to do. I’m talking about within his own camp. Some are arguing, and I’m not sure I disagree, that this is healthy, that you want good discourse and debate and disagreement.

But I think this foreshadows that even with taxes, even with some of the regulatory aspects, there is not uniform agreement on how we get to some of this America First agenda.

So, that’s what I’m expecting in 2025: that a lot of the simplicity people are hoping for is going to be revealed to be impossible and there’s going to be more complexity. But see, complexity doesn’t mean stuff can’t get done or that there won’t be improvement. There is debate as to what improvement will mean. When it comes to things like tax reform, guys like myself and Larry Kudlow, Steve Moore, and Steve Forbes, we have our beliefs as to what improvement means. Others have different beliefs as to what it means.

President Trump has a big agenda in front of him. Economically, he has to prioritize the things he ran on. Presidents generally can’t get elected talking about three big things and then make their big priority a fourth or fifth thing that wasn’t front and center in the campaign. I think it’s going to be bumpy.

I do now believe, unfortunately, that it looks like the tax issues are going to get pushed later into the year. I believe that would have been the biggest lay-up to start the year with—achieve a political victory, a policy victory, and then from that platform go do some of the other things you want to do with trade and energy.

But that’s what I’m expecting going in the new year. I’m writing my annual paper laying out a lot of this as it applies to markets and the economy, and that’s what we’ll have ready for everybody in into the beginning of January.

EICHER: David Bahnsen, founder, managing partner, and chief investment officer of The Bahnsen Group. David’s Dividend Café is available to you for free at dividendcafe.com. And if you sign up for that, or you already have, you can expect that white paper around January 10th , the second Friday of January. So be looking for that. Happy writing, David, and happy new year!

BAHNSEN: Happy new year, Nick.

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