Episode 188 - Marks on the Markets: 2025 Economic Outlook with David Bahnsen
Subscribe to the Podcast:
Join us for our first episode of 2025 as renowned investor David Bahnsen shares his insights on market valuations, economic trends, and policy implications of the upcoming Trump administration. Bahnsen, who manages $6 billion in client assets, discusses why the S&P's high valuations may signal caution while highlighting promising opportunities in private markets. Alongside John Coleman, they explore everything from Japanese foreign investment to reflections on the dignity of work and Christian perspectives on purpose.
Please note that the views expressed by the hosts and guests are their own and do not necessarily represent the opinions of Faith Driven Investor.
All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies and securities discussed. This podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization.
Episode Transcript
Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it.
Richard Cunningham You're listening to Faith Driven Investor, a podcast that highlights voices from a growing movement of Christ, following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.
Speaker 2 Hey everyone. All opinions expressed on this podcast, including the team and guests, are solely their opinions. Hosted guests may maintain positions in the companies and securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.
Richard Cunningham Welcome back, everyone, to what is the first Faith Driven Investor podcast of 2025. Happy New Year. Hope that you and your family and loved ones had a phenomenal Christmas celebration and wishing you just a number of blessings in 2025.
We are kicking off the SDI podcast in style here today as we've got a very special guest, David Johnson, who we will introduce momentarily. And we're doing a mark's on the markets. And so joined as always remarks on the markets episodes as the one and only John Coleman. John, great to have you in the podcast studio. And before we introduce our special guest man. How are the Christmas and New Year holidays and everything like that?
John Coleman It is awesome. Richard. We get to stay local for the most part because we got family around Atlanta. Great time with the kids.
Sovereign's adopted the practice of shutting down the whole firm between Christmas and New Year's. A couple of years ago, which makes sure none of us are bothering each other too much during that time for a faith driven firm. Obviously that's a very special time of year. And so I think we're all refreshed and headed in New Year. Excited for what's next.
Richard Cunningham Awesome, man. Well, folks, I mentioned it. We are starting off the FDA podcast right here in 2025 today As a marks on the Markets episode, we're joined by someone who just lives and breathes the markets. It's David Johnson, who is the founder managing partner and chief investment officer of the Johnson Group, a firm that oversees $6 billion in client assets.
He's coming to us today from New York. He splits time between New York and sunny Newport Beach, California. In addition to the Johnson Group, he is often a guest on CNBC, Bloomberg, Fox News and Fox Business. He's the author of several bestselling books, including his recent one from 2024. David Full Time Work in The Meaning of Life, released in February.
Just a storied career. Someone who's been in the markets, knows the markets extremely well, is a committed, devoted believer. A family man loves USC football, a husband to Jolene and father, to Mitchell, Sadie and Graham. So, David, what a privilege to have you on, just a guest of your stature. Grateful to be talking markets with you and John Day.
David Bahnsen Well, thanks so much for all the kind words and thank you for getting those priorities right with Jolene and the kids in USC football all on an equal footing. So, yeah.
Richard Cunningham That is awesome. Well, we're glad to have you here, David. Maybe one highlight from you all is Christmas break.
David Bahnsen You know, we went to a ski resort in Vermont with our whole family. My oldest is off in college now, and he spent the whole semester studying abroad in Europe. And so we had not been all together as a family since the summer and getting a week away, skiing and enjoying a very cold, white Christmas and just that kind of family time. It was really quite lovely. That was definitely the highlight of my Christmas break.
Richard Cunningham And good for you guys. That's fantastic. Vermont in the snow. Well, guys, we're talking markets today. And I think before we start looking forward to 20, 25, 2024, it's pretty wild, to say the least.
So now you both have a number of just pieces out there and kind of commentary out there. But maybe let's have both of you just kind of highlight what you believe are kind of the seminal moments, whether it be in the markets, economy, political landscape, and let's spend some time there just kind of camping out in 2024 as it sets the foundation for where we are today.
David Bahnsen Well, in terms of the highlights of 24, it's very interesting that a lot of people are going to focus on the election last year and the political moment, which I make a point in White paper I've just published, kind of summarizing the year behind and projecting a lot of things for the year forward. It's our Dividend cafe.com. It's a free paper that I've done every year for a long, long time.
I make the point that the election may have been one of the largest news stories of the year and obviously the largest political, but it's hard for me to justify it even being in the top five as a market story that you had a year in which corporate profits met and exceeded expectations, which were frankly quite lofty.
You had a year in which forward guidance on corporate profits into next year, which is really what markets always trade on. Markets don't trade on the profits that just were they trade on the profits we expect to be because markets are forward looking what we call discounting mechanisms that expectations for profit growth next year is very strong.
You did have a Federal Reserve that began to cut rates. But I want to point out people say, well, the Fed really goosed markets by cutting rates in September. We started off the year believing that there was going to be eight rate cuts beginning in March. By September, markets were up thousands of points and they hadn't cut at all. And so the Fed was not even really driving of markets.
You more or less had the narrative and that the tightening of 2022 was going to lead to recession. It didn't happen in 23. Markets went up a lot. The job. The environment was mostly very constructive and 20 for wage growth was mostly very constructive. That's not to say there aren't pockets of issues within the economy, but those who were worried about something worse in the economy, it didn't materialize.
So markets had to reprice in a little bit more sanguine environment for the macro economy. Then you add that with the end of Fed tightening, so to speak, and a very robust corporate profit environment. So do I think markets are at a high valuation? Very much so. Do I think there's frothiness in the market? Absolutely.
And do I think there's some questions about whether or not a lot of what people hope will happen in 25. Myself included around Trump 2.0 deregulation, tax reform, energy policy, all of those things I think should be constructive, but they're not going to happen easily. There's going to be some volatility around, you know, getting all this executed. So that's kind of our high level position on where markets are in 24 and going into 25.
John Coleman Yeah, I would tend to agree with David on a number of fronts. You know, if I move through the public markets, the story has been this just massive increase in the price of the Magnificent Seven and the concentration of the index amongst some of the largest growth oriented technology stocks in the world has been noted a lot of places.
It's the biggest gap between the equal weight and asset weight. Russell 3000 since the.com burst although I'll circle back I think is structurally different. And those are really solid companies even if their valuations might be a bit lofty at the moment, unlike the.com burst, that obviously creates a number of dynamics in markets.
There's if you look at the subset of public markets, small cap mid-cap stocks are actually a bit undervalued potentially right now on a historical basis because there's been this large cap run for 8 or 9 years now that's been kind of a bull run in that sector driven by these growth oriented technology stocks. And so there are pockets of value opportunity within that.
But there's such concentration in the asset weighted indexes today on a few of these massive flight to quality growth technology stocks that I think understanding the future trajectory of those and how investors will react to those even in the way they treat indexes in their portfolios in public markets is a huge part of the story.
And underlying that I think is a fundamental change in the US economy that I think is partially legitimate and that we have a series of new technologies right now that, you know, every 2 or 3 years we project there's something as big as the Internet, right? Like blockchain was supposed to be that.
I think fundamentally, though, artificial intelligence, autonomy, robotics actually are step change technologies that can reroute the fundamental economy of the US, which is why you're seeing some of these market consolidation movements that are worth talking about. We'll see that materialize over the course of the next 3 to 5 years.
And then in private markets, what's been interesting is just there was this collapse for a period of time in valuations in private markets, a complete freeze up of those in kind of 21 and 22. Those markets have come back, particularly venture markets, but distributions still have not materialized.
Right. And so it's still a little bit sluggish on the private market side because distributions from old funds and investments have not yet materialized. So institutional investors are waiting to re-up into those strategies until they get distributions, which has cause continued sluggishness.
I think that will change in this coming year, which we can talk about why, with Lina Khan leaving the FTC with distributions just coming forward as the economy has improved with people trimming their public markets positions, there are a lot of dynamics at play, but I think those are defining.
And then in terms of the fundamental economy, which David touched on when we entered last year, we were still talking harder, soft landing from inflation and whether we could navigate that. It feels to me as if we've navigated some form of a soft landing, although there's still some debate about what that actually means.
And the Fed did reduce rates, but less than expected. And the bond markets haven't reflected that. Right. If you look at the way that most people get debt right now, the rates and debt markets, whether that be mortgages or corporate debt, have remained kind of stubbornly high versus some of the decreases in rates that the Fed has enacted, which means that the underlying economy is kind of rejecting, at least in certain areas, this decline in interest rates in a high interest rate environment has persisted in certain areas of lending, which obviously impacts homeowners, people running businesses, big corporations, even more in some ways than the Fed funds rate. Right.
And so that disconnect between those two areas of the market, I think is a really interesting story headed into this year. Like, why is that the case? Will that cause some some sluggishness in the business sector, in the housing sector, or do we start to see those things more converge in a more typical way over the course of the next year or so?
Those were some of the big stories to me in 24. I mean, the Trump election obviously is a huge topic. The global ramifications of what might happen in Canada and parts of Europe have huge positive. Implications, like David said, for deregulation, for business growth, for innovation, for mergers and acquisitions. But I do feel that that's more a 25 discussion than a 24 discussion in terms of its impact on the economy.
Richard Cunningham Well, guys, great recap. I think we covered a lot of ground there. And David, you teased out a little bit your annual kind of year behind your head white paper that you put out, the Dividend Cafe, which is just massive fan of the Dividend Cafe and your weekly writing on Fridays.
Let's look at that. Your head kind of sentiment and outlook. You know, would you say optimism, caution or where do you kind of fall on the spectrum? You guys hit on a lot of different topics and kind of macro and economic environment, even kind of political environments. What is your general kind of take and why is that looking forward?
David Bahnsen You know, it really is a mixed bag that there are some components in which I have a very constructive view and I think John will appreciate something I want to share here in a moment about private markets. And then there are areas of caution and concern.
And the easiest part is to cover that. The caution and concern is that an S&P 500 is trading at 23 times earnings and it's averaged about 16 to 17 times earnings for 20, 30, 40 years. So you're a couple standard deviations ahead of your average valuation.
But it's really not just that, because I accept that the last time we were into the mid 20s of a valuation, that the quality of the companies was much less. If you go back to 1999 and 2000 before the.com implosion. I think that's very true. But the top ten companies in the market then were about 20% of the market. They're now 40% of the market, 38.6%, to be precise.
So really, people need to understand that the S&P 500 is 60%, the S&P for 90 and 40%, the S&P ten, and that the yield that the S&P is paying them is 1.1%. It was 2.8% 25 years ago. The price to book ratio, which is not the best metric, a valuation price to earnings because stocks are and should be valued off of profits. But the price to book value is the highest it's ever been in history.
And so you not only have expensive market and yet with some good companies at the top, but those good companies are valued above perfection. And so I think what that does is it skews the risk reward. Can everything go perfectly for another year? Maybe. I don't believe that's likely.
I think at some point in time, and I just wouldn't dare to offer a timing around this, there are some quarters coming. We're in Video announces Microsoft ordered a lot less from us this quarter than we thought. And both Microsoft and Nvidia have a day that people are not going to believe and bring down Nasdaq in a way people are not going to believe. I think that's inevitable, but it's not really the focus of my concern going into 25 long term.
My concern is always that we have a society that is dealing with excessive government indebtedness and that there's been too much crowding out of the private sector from a very high debt to GDP ratio and no political will or public will to do anything about it from an investment standpoint within that.
I do think there are sectors that are not overvalued. I do think there are companies that are not overvalued. And this is the part I was referencing earlier that I think John might appreciate from some of his earlier comments. I have a chart in my aforementioned year behind year ahead paper the ratio of private equity exits to investments, the ratio between how many companies are being sold to how many are newly being invested in has collapsed to a level we've never seen.
It's down about half from where it was ten years ago. There is a big need not for new purchases, but for new sales companies that, by the way, have performed. These are not distressed companies or traumatic exits. These would be rewarding exits. But there's just a ton of dry powder that is built up that they cannot deploy because there's still a lot of companies they have not been able to sell companies for and return money to the limited partners.
So private markets, corporate transactions, I think that the Trump administration would be successful in some needed financial market deregulation. The FTC will be less cumbersome about approving M&A. The interest rate environment will be somewhat more favorable than it's been, and the fundamentals are necessary in both public and private markets for a lot of corporate activity that should drive efficiency, it should drive returns to private markets and it should ultimately move capital, which then allows for new investment and ultimately greater opportunity.
John Coleman If I could just pick up on that last point, I couldn't agree more with David's comments in the private markets. So I'll start by saying I think the fundamental economy in the U.S. is actually positioned for a decent year in 25.
I have David's mid to long term concerns about indebtedness of the country and the way that that impacts us. But I think from a 2025 perspective, the underlying economy to me is looking strong and I think some of the deregulatory impact of the Trump administration certainty around taxes from any new election, etc., is likely to lead to stronger underlying performance in the real economy in the United States. I somewhat bullish on that.
I think the way that might work out in private markets, which David was just touching on, is one of the great things about the lack of distributions and some of the disruption in private markets over the last few years is it has created a lot of pent up activity that has to happen at some point. And I think 25 might be that point and it's washed out a lot of the poorer managers.
So there is a stat I saw recently that fund one to fund two venture firms, typically 50% survive. The last two years it's been 15%, basically. Many funds have not reached their target fund raises. And so the higher quality managers in private equity and venture in real estate are still surviving. But many of the lower quality managers are washing out, which I think could be good for creating constructive transactions in that space, particularly if M&A from public companies opens up more under the new FTC and some of these venture backed companies can begin going public, joining larger firms and, you know, the Googles, Microsoft, Apples of the World, they've got a ton of cash.
They've got really good currency in their public market prices right now. It should be a great acquisition environment for them if they can get past the regulatory hurdles of that. It's my perspective. The public market implication is that I do think, David, I'd be interested in your take. It could be a tale of two markets. I like your S&P ten versus S&P for 90.
You know, if you look at the small cap and mid-cap markets, they're actually trading below or about at the long term valuations of the public markets. But there's always a flight to quality when there's economic uncertainty. And so we feel more settled this year. What I think could happen is some reversion to more typical valuations between that top 10 or 30 stocks and the bottom, you know, 2970 stocks where we see those mid-cap and small cap gain a bit and get more confidence.
And we do see a retraction, not in a dot.com way, but in a return to some more reasonable level that bakes in some margin for error amongst the most powerful growth stocks in the world. That will have a huge impact on the index overall. But for an investor who's positioning their portfolio smartly, there are easy ways to mitigate that impact.
I mean, it's simple. Sometimes it's going equal weight rather than asset weight or as simple as, you know, increasing your exposure to value stocks or to things in the small amid timing is always super difficult. David, as you noted, if you'd made that call a year ago, you would have gotten pummeled in the markets. But it does feel with the current valuation disconnects, inevitable that at some point that gap will normalize some even if those growth equity stocks at the top right now are higher quality than they used to be. At least that's kind of the way I see the coming market correction.
David Bahnsen Yeah. You know, John, it's funny, you bring up two points in there that are a little bit different from one another, but overlap. And I think both of them are important. It's the big cap versus small cap delta that has materialized and the growth versus value. And they're not one in the same. There are two different stories.
Listen to these statistics because they're just fascinating to me. Over ten years, the Russell 2000 is only up 7.7% per year. The S&P is up 13.5, almost doubling. But listen to this. Just over the last four years since Covid, the Russell is only up 3.9. The S&P is up 13.4, a 10% per year difference between big cap and small cap.
Now, to John's point, it's one I reiterate. Timing of this has been very difficult. And keep in mind when we say, well, you could have got pummeled if you did last year, you still would have been up. It's just you would have had a big opportunity cost. You know, value is up. Last year, small cap was up, even weight was up. It just wasn't up as much as market cap weight.
But it is a way to maybe mitigate risk. Now, look at my firm. I happen to know this about John's firm. We're not index investors, and so I don't have a dog in the hunt about even weight versus cap weight. But if I did, I would very much be leaning into even weight right now versus cap weight.
I think it's a great way to play a broadening out of the market and get more exposure to laggards, health care, consumer staples, energy, real estate that are very likely on a relative basis going to do differently. Heard the communication services, technology and even consumer discretionary that have done so well the last couple of years.
So those are very good meta narratives around where the market stands. That it makes it different. You hear this theme from both the comments I've made and John has made. We're not really talking about do you want to be invested or not invested? We're not really having one of those kinds of years or one of those kinds of conversations. It's not risk on versus risk off. It's what types of risks are most prudent right now.
And I think people believing that in video will go from a $3.5 trillion market cap to a $4.5 trillion market cap. You know, keep in mind, from video to be up another 20%, not another 160%, another 20%. It has to go up next year alone more than the entire value of the rest of the market, besides about five companies. Okay. That's just what you're dealing with when these companies are now worth 3 to $4 trillion. 20% of 3.5 trillion is $700 billion. Is Nvidia going to go up in one year after being up 1,200% in the last few years? Is it going to go up in one year? The amount of Tesla's entire market cap. But that's what most investors are invested to.
John Coleman And what's important to what David said is you can still believe in very as a great company with fundamental transformational technology and also believe that that's a difficult narrative for its future valuation. Right. Which is what's different than.com. A lot of those were kind of empty shell companies at that time. You know, Microsoft, Nvidia, Apple seem to be solid, really good companies. That doesn't mean their valuation is reflective of an appropriate level right now.
David Bahnsen I agree 100%. But it's funny people mention that a lot because it's so true that the cash flow generation was so subpar in 1999 compared to where it is now. However, Amazon went from 400 to 6.
John Coleman That's true.
David Bahnsen But before it, you know, ended up storming back. So there's nothing that says Nvidia won't be a huge success story in ten years with a few very difficult years along the way. But I try to reiterate that point John made all the time. I'm not saying anything bad about Apple, Google, Metta or Nvidia, I'm merely just talking about valuation.
And I believe most of us, those that are now 50 year old professional investment advisors, are byproducts of lessons we learned in our 20s and 30s and in the late 90s when I was coming of age as a professional investor, I watched Intel, Cisco, Microsoft give up 15 years of return by being so bought at such an excessive valuation. But they never had a negative year in earnings. They never had a bad operating performance. They were just so overpriced.
In 1999, Microsoft didn't get back to its pre 2000 high till 2016. Cisco still hasn't got back to it and they've grown earnings every single year since. So valuation matters.
Richard Cunningham Well, man, this is good. I'm enjoying this a lot. And one of the things you both have hit on as we think about this kind of so recording this podcast on January 8th, it'll release around Monday the 13th, the following Monday, the 20th, we have a changing a guard and Donald Trump will be inaugurated.
And one of the things you both have hit on is just kind of the Trump administration's mandate to take off some of the handcuffs and the guardrails around M&A activity we've talked about just all that is possible, what could take place. Everyone, of course, sees the headlines of what's taking place with doge and more efficiency in the government and slashing away at that deficit, the massive government kind of just debt spiral we're in.
And David, you're a very transparent individual. You never shy away from calling yourself a lifetime movement conservative, a proud Reagan supporter of the 80s, a permanent leader of the National Review. But you've also been pretty critical of Trump in that this recent Nippon Steel situation where Japanese company Nippon Steel wants to acquire U.S. Steel. Biden has raised his hand to block the transaction. Trump has actually showed support of that same blocking the transaction.
So that doesn't kind of showcase what you guys were alluding to with just the lack of regulation, hopefully to come in 2025. So as you think about the new guard and everything that's going to come with kind of the new Trump administration, I mean, the mandate he received in the election. What's kind of the overall outlook there?
David Bahnsen There's a part of me that paradoxically, I hope people can take this the right way. I hope he has been lying to us about his opposition to the Nippon Steel deal, because I would be more favorable to him having to politic around the issue than I would the inconsistency in the policy.
He did a press conference a couple weeks ago and I was very fond of most of the things he said where he was bragging about SoftBank wanting to put in $100 billion of foreign direct investment in the primary equity deals the United States. And he joked, I'm going to try to upsell them to 200 billion. Where is SoftBank located? Japan.
Japan has over 800 billion, a direct investment in United States, including a company called Nippon Steel that currently has factories in Kentucky, Indiana, West Virginia, Louisiana. Some of those have been there for over 25 years. We just got done selling $3.5 billion of missiles to Japan. I don't believe anybody can take this national security argument seriously.
I understand the politics. I understand the cosmetics around union bosses. But union workers want this deal to happen. Blue collar union workers in Pennsylvania are going to lose their job if this deal doesn't happen. They've offered $15 billion for U.S. steel since the Biden administration blocked it. The company's trading in 7.4 billion. This is not a material deal to the U.S. economy. 7 billion these days as a small cap company.
And so there's one entity that benefits from this deal not happening. China. China steelmakers are over 50% of global steel production. They flood the world with steel. There are legitimate adversary to the United States, a legitimate opponent to the values of our country. Those are actual state owned enterprises. Nippon Steel is a private company in Japan. It is not part of the Japanese government. Japan is an ally of the United States.
When I was a managing director at Morgan Stanley, we took $9 billion from Mitsubishi to save Morgan Stanley with the Treasury Department and State Department begging them to do the deal. Do we want foreign direct investment or not? We have 1 million jobs that have been created because of Japanese foreign direct investment.
So I think your greater point is, are we really looking at a deregulatory apparatus in the Trump administration? And I'm optimistic about it. I think that that was one of the great underrated things that they did in his prior term. And I think philosophically and most of the personnel he's surrounded himself with in this transition are largely pretty Reaganite about deregulation, tax reform, energy policy. But on this Nippon Steel deal, I'm just mystified. Other than the cosmetics of not wanting to look like you're contradicting union bosses. But that's not good enough for me.
John Coleman Yeah. And I would say, as I look at the potential policy implications of the Trump administration this year, and I'll just comment on the economic impacts of this, maybe I'll say a word about the social impacts or why you might do this otherwise. But deregulation would obviously be positive for the economy, particularly if deregulation allows greater innovation that allows greater dynamism in the capital markets, that allows easier business formation, etc.. Those are always stimulatory for the economy.
If the Trump administration follows through on keeping taxes where they are, or potentially selectively reducing those in certain areas, that tends to be very stimulating for the economy. If they can really then apart from the regulation reform, the size and scope of the federal government as a component of that, I think that's a bigger question mark That buzzsaw is difficult to encounter. Right. But if they could do that, I actually think that would receive a positive response from markets.
I think immigration is a separate issue that's being done for other reasons. The kind of idea of closing the border, enforcing legal immigration has a broader set of social consequences. The market impacts are likely to be somewhat mixed of that. But I think that's not really the primary reason that people are arguing for that. And it's dominantly in national security, in a national autonomy point of view, which I think is a very valid set of reasons to have that immigration discussion.
And then the fear I would have, as David notes, I do think what Trump has is an intuition about using trade policy and the tools of national policy to assure that the United States competes on equal footing and ensures its national interests with its partners around the world. I do know that there's a great deal of concern here in Europe and other places that if that were to go too far, that could actually be quite disruptive of the global economic system.
Like if we get back into a series of trade wars, you know, higher tariffs and countries around the world, that certainly has a set of negative consequences both in the United States and abroad. What I don't know, David, and I think you're hinting at this, is how much of that are him using a set of policy tools to achieve a different set of objectives that he has? And how much of that is a real ideological commitment to increasing tariffs, to restricting trade in a more dramatic way, apart from real national security stuff like pharmaceutical supply lines?
Chipmaking. There are some areas I think we're all aware now. We have a national security interest and a national interest in assuring we have domestic capabilities on those or allied capabilities on those, rather than some of our foreign adversaries dominating those. But, you know, the nuts and bolts tariffs and trade stuff is where if it went too far, it could cause a significant disruption, I think, to our economy and the global economy, which David was was outlining.
David Bahnsen I agree so much that it makes me more upset when they use national security as a pretense for not doing a deal illegitimately because it undermines the credibility when there's a legitimate. National security interest, supply chains on national defense, pharmaceuticals, some of the areas you bring up. I think it's really important for markets that we have credibility here. And when there is a disingenuous argument that's made, it undermines the credibility of a more serious and constructive argument that needs to be made.
Tariffs are a big part of my annual white paper because it's a very tricky thing for anyone with a view of markets to understand right now, because the president has been so effective in the past using it as a negotiating tactic, and it's difficult to separate ideology from tactics. And so sometimes I wonder if I'm giving him too much benefit of the doubt. And sometimes I wonder if I'm not giving him enough.
I got to say, most of his rhetoric since the election has not been very protectionist or trade restrictive. It's especially with Canada and Mexico focused on domestic policy objectives crime, drugs, border security, immigration cooperation. And so if he's going to threaten tariffs, they're to extract better domestic policy outcomes with allies, neighboring nations. That's not going to be market impactful. Markets might even like it to the extent that he says things at times like tariffs are going to raise a bunch of revenue.
I just have to hope he doesn't really believe it. Obviously, tariffs are a cost. They're paid by American importers and and there's a cost to it. And it sometimes may fill another policy objective. But, you know, all things being equal, I always say, do we want more trade or less trade? And when people say, well, I don't know, it depends. I say, well, not if you understand what I mean.
Because all I mean by trade is a buyer and seller voluntarily doing something. And how could the answer ever be that we want less of it? If it's two people voluntarily doing it, they must have a reason they want to do it. They get deemed to be in their own best interest. And so much of what we import from other countries are unfinished, unprocessed goods that play a part in our own manufacturing of an eventual finished product. And it really does have a big impact on other elements of the American economy.
But again, very candidly, the Trump administration, I think, knows a lot of this. And I am reasonably optimistic that connected to energy policy objectives and tax policy objectives. I think it will be a net constructive part of 2025.
John Coleman The one other brief comment I'd make, Richard, since we haven't touched on it and I know you want to move on to the next question is another big pillar of the Trump administration that I think could be good for global markets. A little less impactful on U.S. markets is if he actually is able to end the wars in the Middle East and Ukraine.
Obviously, there's a whole human component to that that obviously outweighs any economic component. So I'm not trying to diminish that or overlook that in any way. But I think a settled global security system where Russia is not actively at war in Ukraine, where the Middle East is more stabilized, would likely be a boon, especially for international markets in Europe. And I think we certainly have a period of time where there seems to be a better chance of those getting settled in a constructive way in the next 5 or 6 months than we've had over the last 12 months, so to speak. And I think that if they were settled on the right terms, that that would be a benefit to global markets in addition to the humanitarian benefits, etc., that that would bring.
Richard Cunningham Yeah, I'm glad you brought that up, John. And one other thing, John, I specifically want to ask you about and then David, we're going to hit on some of your writing from last year as well, because I think there are good things to zoom on and they dovetail into this conversation as John, over kind of the Christmas holidays. You put out a Fox News piece on Pax Americana and just great piece. And I think it'd be worth just kind of given a little 62nd flyover of the thesis and there because so much of that parlays into this conversation we're having right now about kind of Trump's next presidency.
John Coleman Yeah. So I'm an American and an American optimist, which is sometimes in short supply these days. And the piece so Pax Americana is a Latin phrase. It's kind of derived. There was this period called Pax Romana a couple of thousand years ago where under the Roman Empire there was this 200 year period of relative stability. I mean, this is we're talking about the ancient world. So relative stability under Roman rule, basically under the stability that Rome created.
People have used that phrase Pax, et cetera, to describe various areas of peace. And what we're in now is year 80. This year, since the end of 1945 of Pax Americana, which is basically the era of peace and stability and global prosperity brought about by the American world order. Post-World War two. After the Nazis were defeated, Imperial Japan was defeated. The Cold War erupted, but the Soviet Union was kept at bay. Communist China was kept at bay.
John Coleman (continued) And there was this just historic rise in prosperity, rising global safety. Rise in free trade, in global travel that persists to this day. It's the most prosperous, peaceful period in the history of the world right now. Right. And that's happened under the American security umbrella, an American economic umbrella for 80 years.
People have been commenting on the end of that for some time. And my article argued that actually I personally think the Pax Americana could persist for the rest of this century, that we are underestimating the possibility that this is a continued American century. And the data is there to give you confidence that this American security umbrella and economic umbrella could extend for quite some time.
America is not quite as powerful as it was in the 50s, right after World War Two. We were 50% of world GDP, 80% of the world's hard currency. But today we're 4% of global population, 26% of GDP. GDP per capita in Mississippi and Arkansas is greater than almost every country in Europe except for Switzerland. Some of the Nordics, which have oil and gas reserves, Monaco, Japan, cheap per capita, I think is on the order of $30,000. That would be by far the poorest American state.
American strength is incredibly high economically on a relative basis. We're still the most innovative country in the world by far. If you look at things like artificial intelligence, every dominant firm in artificial intelligence is American based. A lot of the robotics firms are a lot of the biotechnology firms are a lot of the autonomy firms are. We are blessed in that American companies are really dominating the innovation landscape, space travel, etc..
And we still have the strongest military in the history of the world, right? There are adversaries now who have greater equality with us than they have in the past. But I also believe that while America is strong and continuing to accelerate some of those adversaries, it's easy to overestimate.
I mean, China is set to decline its population by more than 50% by the end of this century because of the inhumane implications of the one child policy that they implemented. There's weakness in their economy. Their fundamental economy is slowed. And for those of us who believe in the fundamental operating system of representative government and democracy, we also know that restricting people's political and economic freedoms in the way that communist countries do historically leads them to decline and to collapse. Right.
And so the piece was really about us having optimism in this operating system of representative government that America and its allies operate under. And the idea that America is not peaked, that we aren't out of the Pax Americana, but that that can actually I think it's better than likely that that persists in an unexpected way over the next couple of decades.
If we can avoid some of the big existential problems in our own economy like debt, which is certainly a concern, but I think that the chess pieces are there for us to continue to prosper. If we can be responsible with our government and lean into the dynamism that's created this era of American peace to begin with.
Richard Cunningham Funny who you talk about, John. Just love the sense of optimism and parlays nicely into David. Going over to you to talk about your book that you released last year, full time work in the Meaning of Life. So as we drive this conversation kind of towards a close, I think this will kind of help all of us step back and have that more kind of redemptive eternal world view, if you will. So I want to give you a moment there, and then we'll go to our final question, gents.
David Bahnsen Yeah, hopefully the underlying premise of the book and the reason that I felt the need to write it can tie into an optimistic conclusion, because there's times in which I feel that I've become very pessimistic about a declining work ethic in American society, both as a man of faith who feels sometimes very discouraged by the church's teaching and messaging around this subject, and then even the underlying kind of American ethos and DNA that is really rooted in something very pro-industry and pro labor, pro entrepreneurial activity, pro risk taking, that does seem at times to be altering in terms of its overall view of work.
The book is making an argument that God made us from the Garden of Eden to be productive, to be creative, to be innovative. And that part of our status as image bearers of God is that we are to take the raw materials of creation that He made and even that we cannot make out of nothing as he can. We are to make out of something that something being his creation.
We are to go be fruitful and multiply and fill the earth and cultivate it. And this was all said before sin entered the world. So we talk so much about work being a curse instead of understanding that work was a blessing that was made by God as basically the very thing that he was making us to do. And then because of sin, it was tainted with the curse of toil. Sweat of the brow. But nevertheless, the work itself was never presented as the curse.
I look around at our society now, and I believe the most contented people, the those that have the most fulfilling lives, they generally wake up every day with a particular purpose. I believe people achieve the maximum flourishing in their life when they're living in obedient communion with their creator. But I believe that even apart from other things that can really enhance our quality of life loving marriage, healthy children, an active social life and community with other friends, these are all vitally important for the good life.
But a purpose in waking up every day have something to do and buy something to do. I do not mean those things that are purely recreational and consumptive, but rather that are productive. I think these things are existentially important to the human person. And I very much want to see the church get back to this message.
And I want to see America not abandon this message because, you know, he was referring to China's declining birth rates. We've seen what's happened in Japan, countries that end up having a declining view of family, end up having a declining view of work. And that becomes a negative feedback loop that you can't get out of. It is fatal for a society.
So the solution to America's problems of despair, of hopelessness, oftentimes substance abuse. The solution is purpose in working productive activity. And this is a message I care a great deal about. And I've been very encouraged by the response to the book and hopeful that that message will continue to get out there.
Richard Cunningham And that's a good one. Well, hey, guys, I know we just got a ton of wisdom right there. But I do think it's worth just as we kind of start off the new year, 2025, just fun to hear about what God's been teaching you in his Word lately. What you're thinking about as we take on a new year. And we'll be quick here. But John, go ahead.
John Coleman Yeah, I actually spent the holiday. I had one other piece come out over the holidays about Jesus because I was reflecting on that a lot over Christmas and it compared Jesus and Emperor Augustus Octavian, who lived at the same time. And it was such an interesting contrast for me to reflect that two of the greatest, you know, 5 or 10 people in history, you know, lived at that same time and were such opposite characters.
Augustus or Octavian was arguably the greatest political leader in history. And that doesn't mean necessarily he did everything I would want to or he was. People may confuse that. But I mean, the man created the Roman Empire that lasted for hundreds of years. He consolidated power in Rome. He set off this period of time that was the most peaceful in the ancient world. And he did so through his political skill. But he was also ruthless. He was focused on power. He was focused on consolidating, that he was violent.
And then at the same time, you know, any historian of that time would have said, gosh, Augustus, his name is going to reign through history. And what was so fascinating to me is for the average person in the world right now, Augustus, his name is a footnote in a passage about the actual best known person in the world. Right. That in the midst of this incredible political power and consolidation, there was this fragile, tiny baby born in a barn who nobody would have picked out at that time and wouldn't have picked out for hundreds of years on a global basis other than those who knew him as truly the most influential person ever born. And something more than that for those of us who are believers, right?
God made flesh this miraculous moment in the history of the universe that happened. And just totally for me, it was like a demonstration of how God sometimes totally upends what we think is important and powerful and meaningful and displays it with such contrast that he could send Jesus who was augustus's opposite at this time, and now this man who otherwise would have been one of the most famous in history, is kind of a footnote, even though he's so learned about. And over Christmas, you know, we had billions of people around the world singing songs to Jesus Christ, this baby born in a barn. And, you know, it's academics on campuses who study Augustus.
And I just I mean, I love the way God works sometimes. And it's still like every time I think about the Christmas story and the redemptive nature of God sacrificing of himself to send his son to us, it's just overwhelmingly powerful to me. And so I know that's pretty cliche to talk about right after Christmas, but I can't help it. Every year I just feel overwhelmed by, you know, the glory of God, the miraculous way in which he works and just the contrast of his values to our sometimes in the way that we think short term.
Richard Cunningham That's great. Come on. Well, David, take us home.
David Bahnsen Yeah, I love that. That's really encouraging, John. And edifying and such a neat way to think about all that. You know, I really enjoyed the kind of New Year's resolution process this year. And and I know a lot of people say, no, you don't. Need New Years. You know, you can make resolutions at any time, and that's true. But I also don't think there's anything terribly unconstructive about using the calendar year to reflect and so forth.
And 2024 was a wonderful year for me, for my family, for our business, for just a lot of things. And, you know, 24 was a difficult year for a lot of people. But what all of us have in common is that 2025 is a new year. And regardless of how the year prior, the month prior, when when one kind of thinks about goal setting or things about where they want to be spiritually, personally in going into a new year, it's kind of a clean slate.
And this is a biblical concept. As I was doing my New Year's resolutions last week, I read Isaiah 43 that talked about forgetting the former things, not dwelling on the past. God is going to do a new thing. And I think that's the story of our lives. It's a story of redemption. It's a story of recreation. Sometimes it's more profoundly reiterated in our lives than others, but it's a constant that we're not captive to anything from the year prior, the month prior, the decade prior, that there's opportunity to go forward with newness. And that ought to present an excitement and a motivation for us and to be encouraged in what God can do. It's the entire story of the gospel, God making things new.
Richard Cunningham Man David Bahnsen of the Bahnsen Group. John Coleman Sovereign's Capital. I don't think I could think of a better way to start off 2025. Some some dialed market commentary, some good patriotism and just great hope and optimism about a new year. So thank you both for your time today. Friends, thanks for listening. Let's go have a wonderful year and we'll catch you next time.
Speaker 2 We are grateful for the opportunity to serve this community and see your listeners come in for more than 100 countries. Faith Driven Investor It can be a lonely journey, but it doesn't have to be. The best way to stay connected is to join a groups study with other investors looking to get the same answers to questions you have and find great community as they do so. There's no cost, no catch. In person or online, you can meet an hour a week with other peers from your backyard or the other side of the world. You can also stay connected by signing up for our monthly newsletter at Faith driven investing.org. This podcast wouldn't be possible without the help of many of our friends. Executive Producer Justin Foreman. Intro mixed and arranged by Summer Drags Audio and Editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.