From the imposition of sweeping tariffs to Nvidia becoming the first $4 trillion — and later $5 trillion — market cap company, 2025 was an eventful year with much to take in. In this episode, Peter and Jeff discuss the Magnificent 7’s recent performance, the future of AI, where interest rates might be headed and more. Plus, each provides a tip of the month to help support your well-being in the year ahead.
Hosted by Creative Planning’s Director of Financial Planning, Jeff Stolper, and President, Peter Mallouk, this podcast takes a closer look into topics that affect investors. Included are in-depth discussions on financial planning issues, the economy and the markets. Plus, you won’t want to miss each of their monthly tips!
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Transcript:
Jeff Stolper: I’m Jeff Stolper, Director of Financial Planning at Creative Planning. With me is Peter Mallouk, President of the firm, and we are Down the Middle.
Reflecting back on 2025, it was an eventful year. The United States inaugurated a new president. We had a record government shutdown. There were global tensions in places like Gaza and Ukraine. Artificial intelligence made incredible leaps forward. Yes, Peter, I have a couple more to go through. There was a successful pig to human kidney transplant, highlighting further advancements in the medical field. The first ever American Pope was elected. And, to top it all off, we saw Travis Kelce and Taylor Swift engaged.
So much to take in. And while I’d love to talk about transplants and engagements with you — Peter, I’m sure people would be interested in your takes — this is a financial podcast, so we’ll instead focus on the markets. Looking back on 2025 as it relates to the markets, there were also a lot of things to pay attention to.
In April, the market took a downturn due to the imposition of sweeping tariffs. We saw a rapid recovery from that downturn, as very often happens. AI and tech stocks drove a disproportionate share of market gains, including Nvidia becoming the first four trillion — and later breaking its own record, five trillion — market cap company. The Fed cut rates three times and international outperformed domestic stocks.
So across all of those headlines, the markets are still ending the year near all-time highs. But much of that growth during 2025 and why we’re near an all-time high is due to the Mag 7. So. Peter, I’d be curious, do you see this as a sustainable path for us?
Peter Mallouk: So much happened in the year, and I think that the Mag 7 is probably the biggest story. The theme we heard over and over and over again is these seven stocks are carrying the day, lifting up the index, maybe masking some more weakness. And it is interesting because you hear that the stock market’s at all time high and international stocks even better, one of the best years ever for the stock market. You would expect, say, the S&P 500 that they all did great.
Almost 200 of those stocks were negative year to date. It’s kind of mind-blowing. So that even feeds the narrative more that the Mag 7 did everything, the Google and Nvidias and Facebooks of the world. But it turns out of the Mag 7, only two of those outperformed the S&P 500. And that was Alphabet, which is Google, and Nvidia. All of the others lagged the S&P 500 to varying degrees. But what these all have in common is they are enormous companies. It was not that many years ago we had our first trillion-dollar company. Now, to your point, we have a $5 trillion company. We have over half a dozen trillion-dollar companies. Many of these companies have bigger market capitalizations than other entire countries have in terms of their stock market or GDP. These have become their economies in and of their own right. Apple is itself an economy that is larger than most nations on earth.
And, to your question, can the Mag 7 continue? Well, interestingly, with five of them underperforming, I do think five can continue to underperform. But I do think what’s interesting about what’s happening now is a lot of people like to compare this to the internet bubble. And with the internet bubble, we had the internet, you’ve got all these people placing very big bets and you have what you would expect to happen in a capitalistic society, which is a lot of those bets don’t work out. Those companies go to zero. A lot of people make stupid bets. Just because you add “.com” at the end of something doesn’t make it an internet company. So you saw a lot of pets.com-type things not do so well.
But you know what else you had? You had some of the biggest winners in the history of earth. There are still today some of the biggest companies we have, like Facebook and Google and Apple and so on. The AI revolution is happening largely in the US. It’s happening largely in larger companies, and some of those are in the Mag 7, and they’re all placing enormous bets. And some of these are going to wind up being winners bigger than we can fathom, and some of these enormous bets won’t pay off.
And so while this year we had two outperform the S&P 500, I think we could expect more of that disparity where we see a few really, really knock the cover off the ball and really shock us in terms of how big a market capitalization of a company can be. And we’re going to see some of them fall far, far behind as their AI bets don’t pay off.
Jeff: There are so many companies out there doing AI though. How do you find the right ones? How do you pick, okay, it’s going to be open AI or perplexity or whatever it is.
Peter: I don’t think there’s ever been a better time to be an index-based investor, because you have two things. One, this turns out to be a very, very expensive cost of entry. This isn’t like the internet. You created a website, you built a business around it like that revolution around the year 2000. This is something where the cost of entry is hundreds of billions of dollars in most cases to be able to compete. So that’s why you see this revolution happening in large U.S. tech companies.
Now there will be companies that come in out of nowhere, create their own wealth. Maybe OpenAI is one of those. Where does it wind up? It’s going to wind up in the S&P 500. If you have a startup do really, really well, the most likely outcome is it is going to get bought by a Microsoft or a Google or as somebody else in a pretty early stage, and then they’re going to be able to democratize and spread it across the world very, very, very quickly. So I think this is the kind of revolution where an index-based investor is more likely to capture than any other economic revolution we’ve seen in the past.
Jeff: Yeah. Cost of entry is certainly high. Cost of maintenance is going to be somewhat high, because you’ve got to pay for the power to power it, and people to maintain it, including talent. There’s, I know, a big talent war going on in the AI space as well. You’re seeing some AI talent get paid somewhat like professional athletes, which is just mind-boggling.
Peter: Yes.
Jeff: But it will be very interesting to see the winners somewhat could be likened, which I’ve heard you make this reference before not specific to AI, but when you look at the early cell phone manufacturers, there were so many of them out there, Nokia, Blackberry, Apple, and not all of them were winners. They were all big players initially, but you look now, they aren’t out there.
Peter: Right. Not only were some of them not winners, but a lot of people think that the first mover is the winner. And to your point, you had Blackberry and Palm way before you had the iPhone. You had Yahoo and Excite way before you had Google. So sometimes it’s not the first mover that winds up winning it all.
Jeff: I remember my favorite search engine used to be Ask Jeeves. Do you remember Ask Jeeves?
Peter: I do remember it, yes.
Jeff: That was my favorite one. That was my favorite one. So a lot to think about as we look to AI. But also as we close 2025 and move into 2026, you’ve got people making predictions for next year. And some of it relates to AI, some of it relates to other sectors. What should we be paying attention to as we look at those predictions?
Peter: Coming into this year, we saw a big group of predictions from all the major banks. Not a single one came anywhere close to where the markets ended up. Almost everybody expected U.S. stocks to do better than foreign stocks. That didn’t happen this year. And most of them predicted the market to have modest gains. Some expected the market to be flat. No one expected what we saw coming. This is a common theme, right, of the last few decades. Predicting the market is a futile, futile game. Quarter to quarter, it’s impossible. No one came into the first quarter expecting the tariffs. That’s why when they happened, the market went down 20% so quickly. It was so shockingly stunning news and why we saw such a rapid change after that. There’s just so much going on at any given moment that short-term predictions are completely worthless. We really have to look at five- and 10-year time horizons.
If you look forward from here, I think you apply the normal statistics. Stock market is positive about 75% of the time, that means the odds are really, really high that at the end of next year, we’re negative. 25% is not a small percentage chance that we’re going to have a negative outcome over the year, but you spread that out over three years, the odds are more than 90% of a positive outcome. Investors need to think that way: keep your short-term needs covered with cash, bonds, and so on. And over the long run, you got to fight off inflation, you got to be an owner, you got to own stocks, private investments, and so on.
Jeff: And we spoke a little bit during our last podcast about the Fed and what they’re going to be doing going into the future a little bit. What do you see there?
Peter: If we look at the bond market today, the Fed is about … We’re predicting maybe a cut or two in the first four or five months, but it’s not overwhelming odds anymore. It’s a very interesting place. You’ve got the administration pushing really, really hard, their influence to get lower rates, but we’re not in an environment where you would normally see that. We’ve got low unemployment, U.S. stocks are at an all-time high, international stocks at an all-time high, small stocks at an all-time high, real estate still holding up. Speculative assets doing very, very well.
If we just had that information, we’d expect a rate hike. But what we are seeing is this case being made to lower rates a little bit. The bond market puts us at about 50/50 that that may happen in March or so. I think rates are about where they’re supposed to be right now unless we get new information. But what I don’t think anyone’s predicting is major moves. No one’s predicting very major moves one way or the other.
Jeff: Yeah. With the Fed’s mandate being control inflation, control unemployment to the extent that they can, it seems like they’re on a good path right now, but it’s a TBD also, as it always is. Sometimes with economic indicators, actually not economic indicators, but economics in general, you don’t know what you’re in until six months after it occurs.
Peter: That’s right.
Jeff: Okay, Peter. Well, let’s move into our tip of the month. What do you have for us?
Peter: So everyone’s always talking about what they’re going to do in the new year, all the things that they might add. It’s funny, I go through this ritual every year, and actually I do it every month because I’m crazy like that, where I actually have a reminder of what am I doing that I should not be doing?
And a friend of mine happened to send a message this morning that actually said the same thing, and this would be my tip of the month. Go into the new year, not saying, “What are you going to start doing?” Everyone adds, “I’m going to exercise or walk more, lift, whatever.” What is it that you’re doing that really isn’t helpful to your life and eliminate it? With investing, there’s a lot of things you could do. If you happen to be someone that consumes a lot of financial media and you’re checking on your portfolio every day, it doesn’t really add any value. I mean, the wealthiest families, they are thinking about their money strategically. They look at it over long periods of time. They’re not looking at it every day. It’s a total waste of time.
It’s a great example of something that you can eliminate from your life and do something more positive. Whatever that may be, family, friends, exercise, whatever. If you’re spending a half hour on it every day and you do that over the course of your life, that’s a huge, huge amount of time and you can kind of take it out of the financial world into your personal life as well. How about you, Jeff?
Jeff: That’s a really great tip. I like that a lot. My tip is to set yourself up for a smooth 2026 now. That would include things like making sure your 401(k) contributions are set if you’re still working, particularly make sure that you are getting your full employer match if there’s offered one. Maybe go through your bills like your utilities, your cell phone bill, your cable bill, and set those on autopay. To Peter’s point, you might be able to free up some time to do something else. So maybe something you’re not going to do is manually pay your bills every month.
And then over the next month, be on the lookout for your tax documents, your W-2, 1099s, 1098, all the things that you need to accumulate to successfully prepare your taxes. If you can keep track of those as they come in, as opposed to scrambling on April 14 to try and find them at the last minute, and keep them in a safe place along the way, I think you will find your tax prep to be smoother than ever.
So thank you to all of our listeners for 2025. We really look forward to spending 2026 with you. I’m Jeff Stolper, Director of Financial Planning at Creative Planning. With me has been Peter Mallouk, President of the firm, and we are Down the Middle.
Disclosure: This show is designed to be informational in nature and does not constitute investment advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy, including those discussed on this show, will be profitable or equal any historical performance levels.
