Should You Buy the Dip in 2025?

Bob Lang joined Conway Gittens on February 10th at the NYSE. They discussed dip buying, Bob's favorite picks, and the consumer. Watch the whole conversation below.

Transcript

CONWAY GITTENS: Bob Lang is a contributor at TheStreet Pro, and he's joining me here at the New York Stock Exchange. Thanks for coming by.

BOB LANG: Great to be with you, Conway.

CONWAY GITTENS: So can you describe the market environment that we are in right now, and how does it compare to Trump 1.0?

BOB LANG: Well, the market environment right now, I can't tell you anything but being bullish right now. I mean, every single drop that we've had for the past few weeks, certainly since the beginning of 2025, has been bought by the dip buyers. And that is a great characteristic of a bull market. And frankly, until that changes, you have to believe that the market is going to continue to make higher highs and higher lows, which is our textbook technical definition of an uptrend.

So I think that, you know, bullish until further notice. And here we are. We're up almost-- almost 1% today here on Monday. And I think as the-- as the markets reach for that all time high on the S&P 500, which is about 6100. We're almost there. Once we reach that level, it's going to be a decision point to see whether we can take the markets up even higher.

But by and large, I mean, this market has been very broad in terms of ranges for stocks to be moving up. And we're seeing broad participation, not just in the technology areas, the Mag Seven that if you will, but also in financials, in industrials and in consumer-related stocks and stocks that you wouldn't think that were going to be driving the markets at this point in time of the year. But they are-- but they're doing it.

CONWAY GITTENS: So this bull market trend though predates Trump, right. And so if you put it in context, like this time period that we're in right now, how does it compare to the overall market landscape?

BOB LANG: Well, I think I think by and large, Conway, I think the overall landscape is a little bit uncertain right now. And I think certainly with the pronouncements of tariffs for the past three weeks, and we saw, you know, today, notwithstanding the last two Mondays, I've seen markets really taking it on the chin but bouncing right back after-- after getting, you know, hit by about-- close to 1, 1.5% on each of those days.

So that tells you a lot. Tells you a lot that people are seeing the opportunity to buy these dips. As challenging as the markets have been for the past, you know, 6 and 1/2, 7 weeks, certainly at the end of 2024, we did have our challenges. The December was only the second down month of the whole year in 2024, April being the other one.

But, you know, coming into the year, there were a lot of questions, many more questions that we've had, but we haven't had them answered just yet. But I think the market is telling you that things are probably going to be OK, at least for the next 9 to 10 months.

CONWAY GITTENS: And I'm wondering, you know, we had double-digit growth, not just double digit, but like 20% plus growth in the S&P 500 for like the past two years. What are you thinking is going to happen in 2025 when you have such strength?

BOB LANG: Yeah, I think the markets are pretty much over their skis right now. And I don't see those big returns happening again for 2025. Certainly, there isn't a precedent for that. And maybe high single digits to low double-digit returns would be fantastic, especially in this environment where the Fed is easing up on the-- up on the gas pedal when it comes to interest rates.

I think that is really an important point there with earnings and with the Fed and with interest rates. And if all of these are all in alignment, going in the right direction, you could certainly have a, you know, certainly make a call for stronger markets in 2025. I just don't see it happening up to 20 to 25%.

Again, that is going to put the multiple at a very, very high level, probably about 23, 24 times earnings. And as we know, if you go back 25 years, back to 1999 to 2000, we had a multiple of about 25, 26 times earnings. And you know, we know the market crashed right after that.

CONWAY GITTENS: What is gold telling us about this market environment?

BOB LANG: Yeah, I saw gold up this morning about 40, 42 bucks up to an all-- new all time high. It's pushing $3,000 an ounce. It's telling us that, you know what, there's going to be some heavy inflation down the road. You've got to be careful because and the Fed has got to be watching this because if they continue down this road, this path of easier monetary policy, at least easing up where we're at right now, we're at 4.25% on the Fed funds futures. If they bring it down even more, that's going to, you know, probably fuel a little bit more inflation.

Gold is seeing that. And I think we see a lot of other commodities as well seeing the same thing. We see oil prices going up. They were up about 1% this morning. We see silver going up, other commodities. We've seen highs, Conway, in sugar, in coffee and in lumber prices. These things are all commodities that, you know, people are going to be using over the next 16, 24 months. And if the prices go up, it means the costs are going to go up as well too.

CONWAY GITTENS: And so does that mean an inevitable slowdown? Because as the prices reach these peaks, you know, not the market, but people, consumers, businesses have no other choice but to pull back?

BOB LANG: Right. That's right.

And you remember about-- remember last year, Conway, what was the talk about when the Fed was trying to engineer a soft landing? And there was a lot of talk out there that saying, well, maybe there's going to be no landing. And I think that that's where we're at right now. So we're-- the plane is coming in, but it's not feeling the ground yet with its wheels. And I think that could be an issue here.

And I think you hit on something very, very well that-- that if the market does not see this happening too quickly, it's going to start, you know, sniffing out a market-- an economy that's slowing down. And, you know, when the economy starts slowing down, it means earnings are slowing down and it's a chain reaction. We're going to see the markets coming in as well.

CONWAY GITTENS: But then doesn't that chain reaction prompt the Fed to move, right? If stuff starts slowing down, we're thinking, well, the market is pricing in what? Like, one rate cut this year. But if things start to slow down, the Fed is going to be like wait a minute here. Maybe we need to go ahead and pull the trigger.

BOB LANG: Well, you would think so. I don't think that there's a lot of people out there who think the Fed follows the market, has their thumb on the market. I don't think that that's really the case. I think really I think they learned their lesson a year or so ago when they were starting to talk about inflation being transitory. Remember that?

And I think that they're really just hell bent on trying to get the markets back to a place where, you know, you have some sort of stabilization in prices. I mean, that's one of the mandates is stable prices.

So I think, yeah, you know, certainly the Fed could do something to help goose the markets back up and goose the economy back up by adding a little bit more liquidity. But they're not doing it right now. And the market's continually going up.

CONWAY GITTENS: So talk to me about the whipsaw of volatility and the return of volatility. How should investors approach a market where volatility, not only does volatility return, but you have a whole new class of Robinhood investors who have never seen volatility like this before?

BOB LANG: That's right. So-- so let's remember what volatility is. Volatility is just basically the market's reaction to the uncertainty that's out there into the future, right. And the vix is the way we capture that. We look at volatility in terms of the vix futures term structure and the cash. And what it's trying to do is capture the volatility that can be in the markets over the next 30 days, 60 days, 90 days.

So that being said, you know, if there's a lot of uncertainty out here and frankly, you know-- you know, you tell me. I mean, when we close the markets on Friday, are we worried that on Saturday or Sunday there's going to be some news about tariffs? Well, you know, the last couple of weeks that's been the case. So now we have something more to worry about.

And the more things we have to worry about, Conway, about the uncertainty, the more that volatility is going to start to rise. Now, remember volatility is a two-way street here. It's not a bad thing. It's only a bad thing when people start selling into the down move. All volatility is that the market's going to move like this. If it's moving normally like this, it's going to-- higher volatility it's going to move like this.

It means that there's going to be bigger down days, but there's also going to be bigger up days. But you know as an investor, I feel 6 to 10 times worse when the market is going down a lot than it is when the market's going up a lot. So that's going to cause me and a lot of other investors to go ahead and sell and fire my stocks before I have a chance to lose any more money.

And usually, that's the wrong way to go-- wrong approach, right? Because when volatility is starting to spike, we want to be selling volatility. We want to be getting along the markets. You know, when people are throwing the baby out with the bathwater, they want to get in there and start.

They should be getting in there and start buying stocks. But you know at this point in time-- with volatility, it's actually a fairly muted, Conway. It's a 15.5 right now. You know, which you think that you know it's expecting-- the market is expecting about a 1% move in the markets over the next 30 days. And that's relatively normal-- a little bit less than normal than we-- than we normally have.

CONWAY GITTENS: So as you keep a close eye on the vix, how can the average investor use volatility during Trump 2.0?

BOB LANG: Well, I think, you know, big spikes in volatility when we get them-- when we got them in late in January. Our good opportunities to jump in there and start buying stocks. I think you have to hold your nose and dismiss all of the things that are-- all the distractions that are coming around you. You know, things like, you know, tariffs or any other attacks or talking about the Gulf of America or, you know, we're going to pick up Gaza.

All these little silly things that are going on that we have no control over. If they're affecting things in the markets, then we can take advantage of that opportunity, especially when the markets come down on a big spike in volatility. And I think those are the chances that we have to jump in there.

I mean, when you talk names like Meta recently got hammered on some news that really was unrelated to them. There was an opportunity for you to pick up some of that-- some of that stock. And now it's at or near all time highs.

CONWAY GITTENS: So in trader speak, we're here at the New York stock Exchange. You're telling people buy the dip.

BOB LANG: Buy the dip. Yeah, yeah. Buy the dip.

CONWAY GITTENS: OK. How to play the AI revolution as an investor, especially if you haven't gotten in on it yet?

BOB LANG: Well, I think a lot of people are going to be disappointed to hear that. I'm not going to endorse playing NVIDIA. Obviously, NVIDIA is the one chip master that's out there getting out in front of AI and has been, you know, it's been the huge player. It's been the huge winner, no question about it.

But I think there's other names out there like a Broadcom that are going to be a-- going to be huge winners that haven't really scraped the surface of their business yet. I think you look at a name like Broadcom and then a name like MRVL International, M-R-V-L, which is also another name that integrated circuits.

So at least in the semiconductor space, you know, there are alternatives to NVIDIA here. I also think that, you know, Microsoft is still going to be a big winner, although they did talk about some weakness in the cloud business in their last earnings report. They're going to be a huge winner I think in AI.

I do think Google is also-- Alphabet is going to be another huge winner as well. So there's a lot of them out there that haven't really-- they're exposed to some of the AI right now, but I think going forward, I think there's a lot of riches to be had from those.

CONWAY GITTENS: And what about AMD? I know when their results came out, the results were good, but people are still saying like, oh, they're not doing enough to catch up to NVIDIA'S. Like NVIDIA is like the-- it's like the benchmark.

BOB LANG: Right. It's a huge race out there for the business. And I think if AMD, you know-- look, I mean, it's pretty cyclical right now with those businesses. There was one a couple of years ago, NVIDIA was a little bit down and AMD was rising. And now the tables have turned for both those companies.

But I think that, you know, by and large I think AMD is here to stay. They're going to-- have some good products. I know Dell uses AMD chips. I think that they're going to be a good alternative, especially if, A, if NVIDIA runs out of chips and, B, if their costs are just too high that people don't want to spend that kind of money.

You know, AMD can come in and lowball them on the price. I don't mean talking about what DeepSeek is doing giving-- basically giving it away, but I certainly think that they can come in there and lowball on the pricing and grab some share of the business down the road.

CONWAY GITTENS: And so when you look at the AI investment thesis, when you look at Mag Seven, how does that compare-- and you brought this up a little bit earlier. How does that compare to say like the internet tech boom and what happened with the stock market there? What are you looking at? Similarities and differences.

BOB LANG: Well, I think I lived back-- I invested and lived during that time during the tech, the dotcom time. And it was-- it was fun for a little while. Listen, I was-- listen, I was in that bubble, you know, and listen, you know, what people identified it as. You remember something that people who identify a bubble are the ones who are on the outside looking in.

They're not participating in it. I was in there. I was loving it. I was enjoying it. I was making lots of money. My clients were making money. It was a wonderful time. Until 2000 came along and the whole thing just burst right in our faces.

But anyway, so getting back to your question, how does-- how does this compare? I think back then most people were looking for companies that were grabbing market share. They weren't necessarily grabbing earnings or grabbing revenue. I mean, there were a lot of companies out there that were-- that were-- that confessed that they were, you know, getting revenues, but they wouldn't-- they could not see themselves making a profit until as far as the eye can see for years.

And back then it was OK to do that. But today, you don't get a pass for that. So I think there's a lot of companies today that are very diligent about earnings and about bringing revenue in and cash flow in-- for their for their investors. And I think that that's a marked change from what it was, say, 25 years ago.

Back then nobody really cared about earnings. I think analysts and hedge fund managers and so forth, and mutual fund managers, they're carrying a lot more today about what the companies are bringing into the bottom line than what they did back then.

CONWAY GITTENS: So it's like, show me the money.

BOB LANG: Show me the money. That's right.

CONWAY GITTENS: So tell me which stocks are on your watch list right now?

BOB LANG: Well, I've got a couple of consumer names, Conway, that I really like, and one of my favorites has always been since they went public about 10, 12 years ago is in Hyatt Hotels H. And Hyatt Hotels is one of the more premier brands of hotels. You've got names like Hilton and Marriott, of course, but-- and then you've got Hyatt and then Intercontinental.

But I like the Hyatt brand only because they cater very well to the high-net worth individuals overseas in Europe and in Asia. They do-- they're going to be reporting earnings this week on the 13th. And last week we saw-- we heard earnings from Hilton. And we saw-- we heard them talking about growth from overseas, especially in Europe.

And so I'm very excited about that because I think Hyatt it's going to going to post some really strong numbers.

And then on the other-- on the other side, I like Chewy CHWY, which a lot of people don't-- maybe don't recognize, but Chewy, not the restaurant, but the pet store name, which was spun off some years ago. Chewy is has been growing like crazy. They're doing lots, all sorts of things in terms of medical for pets. And their digital business has been off the charts.

And the last quarter they surprised to the upside and even announced a big share buyback. So the stock has been doing very, very well. It's been kind of flatlining between the $35 and $40 level.

I think over the next 15, 16 months, Conway, the stock's got some room to get to $50, $55, if not more. So I-- and they're always on the radar screen for a buyout as well too. So I'm not saying that's going to happen. But you know, they're always being talked about as a potential-- as being potentially suited.

CONWAY GITTENS: And you have a housewares company on your list too, right?

BOB LANG: I like Williams-Sonoma WSM, which is another consumer name. I like Williams-Sonoma as a big, strong consumer brand. They're going to be reporting their earnings for the fourth quarter, which includes the holiday period November, December and January in about a-- in about a couple of weeks. And the last quarter was just lights out. It was a blowout quarter with huge margins gains and huge share gains, big revenue.

And I think that this last quarter, being the holidays, was probably a good strong quarter for Williams-Sonoma. And I think, you know, they're trading near all time highs right now. And I think that this stock's got some room to get to about 300 bucks. I think it's about $210, $215 right now. Maybe about $300 by the end of the year, which would be a huge gainer for them.

But I think that as long as the margins are really strong and their market share is increasing, they can come back with a with a nice big buyback. They did that last quarter as well, too. All things-- all systems go for Williams-Sonoma.

CONWAY GITTENS: So I'm scratching my head a little bit based on some of the things you talked about earlier. If interest rates are higher for longer, if commodity prices are headed higher, and on top of that, we've got the threat of tariffs. Why would you like consumer-facing brands, especially somebody like Williams-Sonoma, which is getting stuff imported?

And you also mentioned-- Well, Hyatt is travel. But let's talk about the-- why are you so bullish on consumers given the macro?

BOB LANG: Well, I think at least for 2025, Conway, the job market has been-- is still robust. I mean people are working and even last week's jobs report even was a little bit disappointing. The unemployment rate dropped from 4.1 to 4%. So it's a very, very tight job market. A tight job market means that labor costs are high and they're increasing. And we saw that also with labor costs.

So when people are working, Conway, they're going to-- they have money and they're going to spend, right? So I mean, and you know, we heard that from-- this morning from earnings from McDonald's. McDonald's is up about 5 or 6% today. And why is that? And they didn't produce a very good quarter at all. They mostly in line slightly better on the international side.

But they're talking about growth over the next 15 to 18 months. And that they think that they're grabbing market share from other competitors. So this is what it's all about. It's about spending money. And look the economy is 70% of the responsible from the consumer. And I think that this is where you want to-- this is where you really want to be-- so.

CONWAY GITTENS: All right. So you mentioned the jobs report. What are some other economic indicators that you are looking at that you feel are not getting their time in the sun?

BOB LANG: I think consumer sentiment is really not been looked at too closely here. I think consumer sentiment has been very, very strong. It's been very solid for the past six months, but people are looking at other indicators as well too, like the ISM numbers or the PMI numbers. These are all manufacturing industrial type data.

But I think the data as it relates to consumer and you're asking consumer what they're actually doing and what-- where they think they're going to be in six months or eight months. Those things are really important right there. So I think that, by and large, you know, that data is really pointing towards a strong consumer over the next year or so.

CONWAY GITTENS: But are you getting a little bit worried? I mean, that number we got on Friday really spooked investors in terms of the inflation component of the UMich number and also the weakness was broad based. It was all income levels. It was all demographics. It was all political leanings.

And so that was at the second month in a row that we've seen consumer sentiment pull back.

BOB LANG: Yeah, that's a little worrisome right over there. But I think that, you know, by and large, those numbers are very malleable here. And we can get some good strong numbers following some good jobs data and some good sentiment numbers from other sources and so forth.

The Michigan number was, as you mentioned, was not good, was not positive at all. And I think that that's something that we need to take a look at. But we-- consumer credit is rising.

So you know, I mean there's an argument to say that consumers are spending too much or-- and also an argument to say they're not spending enough. So I mean, we're sort of in a no man's land over there. But I think that, you know, by and large, we're looking at the strength of the consumer driving the economy in 2025.

CONWAY GITTENS: All right. So my takeaway from this interview is still bet on the US consumer and buy the dip.

BOB LANG: That's exactly right.

CONWAY GITTENS: All right. Great. Thank you so much. Bob Lang is contributor at TheStreet Pro and you are watching The Street.