2025 will be a strong year for stocks, but expect some volatility, says Brian Reynolds

Welcome back. We had a record year for stock buybacks in 2024, and we're already off to a strong start in 2025. And that's because corporate bond issuance is surging this month. My next guest expects that to lead to even more buybacks, which will keep driving stock market gains. Brian Reynolds is back with us. He's the chief market strategist at Reynolds Strategy. Brian, it's great to check in with you, especially in a year where there's a lot of concern about how we're trading at high valuations and, you know, whatever's going to happen with kind of the How are you looking at this market and expecting this kind of pretty strong performance? Well, Happy New Year. I think it's going to be a good year for stocks, but a volatile year. We're going to have a choppy earnings season coming up in a couple of weeks. We've got a lot of political drama on the table. We're going to have government debt government shutdown battles. We're going to have debt ceiling battles. We're having a Speaker of the House battle right now as we speak. So that's going to add to some volatility. But the debt fueled buybacks are so strong that over time they will overcome that volatility. And so, Everett, that makes a lot of these sell offs a buying opportunity. But you do note that we're one standard deviation above trend. If we get to two, then you kind of want to be a seller. Yes. The buyback announcements surged in November and December. We had almost half a trillion of new buyback announcements during that time. So over 2020, 25, that money is going to get put to work. But if it pushes stocks up too high to two standard deviations above trend, I want to be a tactical seller. But you're also going to have volatility from the forces that I just mentioned. If stocks get pushed down to trend, I want to be an aggressive buyer from a tactical standpoint. Is there anything, Brian, that would change kind of the corporate buyback strategy? I'm thinking more of like the expiring tax package that has to be renewed and things like that. Or the conditions that have given rise to this phenomenon still largely in place. And do you expect companies to have the kind of capital to use to broadly do buybacks instead of a lot of tech companies now, for instance, who have to use that for investing in AI? These buybacks are driven by public pensions and insurance companies. Those are the biggest investors in the world. They are underfunded and they're too optimistic about yields. So they have to invest aggressively in the credit market. If something changes that, if there's a credit crisis, then we'll revise that. But I actually see things getting stronger. We kicked off this year with a great day after New Year's in the credit market with insurance companies and automakers being able to access the credit market. And that tells me that the banks, after they report their earnings, they're going to access the credit market and leverage its economy up more. So the one thing I think could change things is to the opposite side, the Biden administration put in a buyback tax. If that gets repealed, then you're going to have more buybacks. That's a great point. It's a tax that we barely even talk about. I know it was not a huge amount, but still, less of something, you tax it. We've still had this boom. If that goes away, I can only imagine. Brian, thanks for joining us. Kind of follow the dollars. We really appreciate it. Thank you. Brian Reynolds of Reynolds Strategy.