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- 🇺🇸 U.S. Economic Data Holds the Key
🇺🇸 U.S. Economic Data Holds the Key
& Big Tech's 27% FCF margin.
Austin & Robert from Rich Habits
January 16, 2025
Good morning,
A quick breakdown — in case you don’t have the time.
⭐ This week’s inflation reading was very bullish.
⭐ Our 100th (!!!) Monday episode broke down 2025 market predictions.
⭐ Interest in Bitcoin is undeniably surging.
⭐ We’re witnessing a historic increase in Big Tech free cash flow margins.
⭐ NEOS just released a new income-focused ETF for real estate: IYRI
Market Overview
As of market open, 01/16/2025
Chart of the Week
This week’s inflation reading was very bullish.
But there’s definitely two sides to this situation.
On one side — the overall U.S. Consumer Price Index (CPI) moved up to +2.9% in December, the highest rate since last July. Core CPI (which removes food and energy) came in at +3.2%, which is the 44th consecutive month above +3%.
On the other side — Core CPI’s annual rate was decreased from a month before and beat expectations of +3.3%. Shelter prices (which comprise one-third of the CPI weighting) were up +4.6% year-over-year, which is the smallest annual gain since January 2022.
Clearly, there’s both positives and negatives that can be derived from what’s going on with inflation. The reason this is the Chart of the Week is because economic data hasn’t been this important for the stock market in over a decade.
Inflation numbers narrowly beat expectations and the market absolutely pumped (while Treasury yields tumbled). Our predictions were correct and it’s becoming abundantly clear that this market desperately wants to go higher — but so much hinges on this economic data.
Here’s the main data points we’re watching closer than ever throughout Q1:
Inflation for Consumer (CPI)
Inflation for Producers (PPI)
Personal Consumption Expenditures (PCE)
Jobs Reports
Retail Sales
Are valuations frothy? Absolutely — but read Austin’s section below to see why we think this is not anything to worry about (for now). We’re not panicking until economic data materially deteriorates and inflation reaccelerates.
This is a big moment for the market. If the economy is looking stable and inflation less sticky, the Fed becomes a bit more dovish. If Trump’s first actions in office are well-received…. we will likely have ourselves a melt-up in the markets.
“Today’s CPI may help the Fed feel a little more dovish. It won’t change expectations for a pause later this month, but it should curb some of the talk about the Fed potentially raising rates… And judging by the market’s initial response, investors appeared to feel a sense of relief after a few months of stickier inflation readings.”
A Quick Word for Rich Habits Network Members
We’ve been absolutely blown away by the incredible strides that are being made in the Rich Habits Network. Whether its major stock wins, crypto successes, paying off debt, mastering a monthly budget, or even simply helping a family member — the positive things we’re seeing in this group has been so special.
Cheers to our 521 members and we’d love to welcome more of you to the group. The Rich Habits Network is active 24/7, and it’s the primary way that we’re able to communicate with the audience.
We’re already excited for next week’s livestream!
Below is a heartful note published this week in the Rich Habits Network by a long-time network subscriber.
In Case You Missed It…
In this week’s special 100th (!!!) Monday-morning episode of the Rich Habits Podcast (linked here) — Robert and Austin shared their thoughts on how they’re navigating the markets in 2025 and what might be different this year.
Here’s what they discussed:
The IPO Market Will Heat Up — After a sluggish few years, the IPO market is poised for a comeback in 2025. With the Federal Reserve cutting interest rates and investor sentiment improving, conditions are ripe for a surge in new public listings. Companies like Stripe, SpaceX, OpenAI, and Databricks are ready to capitalize on this environment. The launch of the Texas Stock Exchange in late 2025 or early 2026 could also bolster the IPO market by offering lower costs and easier regulations.
Volatility is Coming — The relatively calm markets of 2023 and 2024 may give way to more turbulence in 2025. On average, the S&P 500 experiences a -14% annual pullback, but recent years have been much smoother. Expect multiple double-digit corrections this year. To prepare, Austin is turning to hedged equity ETFs like NUSI, which combine income generation with downside protection.
The Crypto Bull Market Peaks — Bitcoin and many alt coins have delivered stellar returns over the past two years, but the current bull market is closer to the end than the beginning. While Robert anticipates a milder bear market due to increased regulation and adoption, Austin predicts steep pullbacks for alt coins and plans to take profits strategically.
2025 will be a year for investors to stay informed, adapt to volatility, and look for opportunities in emerging areas like IPOs and crypto.
Success will favor those who position themselves wisely and act decisively!
Here’s a link to the Q&A episode that was posted this morning.
We answered questions from: Jared H, Brian T, Conrad W, Dakota M, Edith D, AC, and Jon N.
You can submit questions for these episodes by asking them inside of the Rich Habits Network, replying to this email, or sending us a DM on Instagram.
The Rich Habits Podcast is available on Spotify, Apple, iHeart, YouTube, and wherever else you get your content!
Robert’s Callout
Interest in Bitcoin is undeniably surging.
According to Google Trends, the current global search interest for Bitcoin is at its highest level since 2021 — signaling a renewed wave of public attention toward crypto.
Over the past several weeks, worldwide searches for Bitcoin have doubled, marking a significant increase in curiosity and engagement. Despite this surge, current search levels still remain below the all-time highs seen in December 2017 and the notable spikes of 2019 and 2021.
The renewed interest coincides with an impressive rally in Bitcoin prices. Since November 1st, the cryptocurrency's value has skyrocketed by +42.5%, surpassing the $100,000 mark.
Not to mention — President Trump is poised to be “the first crypto president” and he seems to view crypto as a “new stock market” in its own right. It’s going to be VERY interesting to see what he says in the early days of his term, and I know that I’m holding strong throughout that time.
Bitcoin is trending in a big way — sparking a lot of positive sentiment across financial markets, social media, and mainstream news outlets. I believe we have at least one more leg up in this market.
As many of our listeners know, Austin and I have slightly different approaches during this crypto cycle. He plans to sell most (if not all) of his crypto, and I’m taking smaller profit chunks along the way.
Whatever your approach may be — have a plan and stick to it! You’re the one that’s in charge of your life and I encourage you to be wary of the fake gurus out there!
Cheers to hopefully more upside ahead.
Austin’s Callout
We’re witnessing a historic increase in Big Tech free cash flow margins.
The financial performance of the top 10 S&P 500 companies is breaking records this decade — driven by remarkable free cash flow (FCF) margins. The top 10 companies are now averaging an unprecedented 27% FCF margin — higher than any other period in history.
To put this into perspective:
In the 2010s, the top 10 companies managed an average FCF margin of 22%, which was a significant 5 percentage points lower.
Going further back, the average was just 15% in the 2000s and 10% in the 1990s.
As of Q3 2024, several major players in Big Tech are leading the charge:
Apple ($AAPL): 25% FCF margin
Nvidia ($NVDA): 48% FCF margin
Microsoft ($MSFT): 29% FCF margin
These three companies exemplify the sector’s ability to generate mind-boggling amounts of cash flow — fueled by dominant market positions, expanding profit margins, and growing demand for their products and services.
This financial muscle is reflected in their influence on the broader market. There’s a reason why the top 10 S&P 500 companies now account for a record 38% of the index’s total market value. It’s because they are generating immense value, while also having enough cash to weather economic storms + reinvest effectively into their new business segments.
So why does this matter?
The surge in FCF margins highlights the evolving nature of the global economy, where Big Tech not only drives innovation — but also operates with unprecedented efficiency. With cash generation at these levels, these companies have greater flexibility to reinvest in growth, acquire competitors, or return capital to shareholders through buybacks and dividends.
Oh and by the way — record free cash flow often leads to record profits…
If you’ve listened to the Rich Habits Podcast or tuned into the weekly livestreams in the Rich Habits Network — you know how I’m playing things right now.
We are in a bullish uptrend, and I continue to be bullish. However, I expect a pullback (or multiple pullbacks) of 10%+ throughout the year.
What am I doing when that happens? You guessed it! I’m absolutely smashing the buy button on Big Tech companies that are printing cash.
I’m looking forward to riding the seemingly inevitable volatility of this market and taking advantage of long-term buy opportunities!
The Rich Habits Radar
👉 Major U.S. banks reported strong earnings, led by JPM and Goldman Sachs.
👉 XRP ripped to its highest level since 2018, partially due to ETF optimism.
👉 Robinhood soared after being listed as a top stock idea by Morgan Stanley.
👉 Retail Sales growth fell short of expectations in December, increased +0.4%.
👉 Investment banks anticipate an increase of M&A activity under Trump.
👉 NEOS just released a new income-focused ETF for real estate: IYRI
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