In this week’s episode of Retire in Texas, Darryl Lyons, CEO and Co-Founder of PAX Financial Group, breaks down his top ten convictions for 2025, exploring trends and insights shaping the financial landscape in the year ahead. From housing market optimism to artificial intelligence entering the mainstream, Darryl offers thoughtful perspectives to help you navigate opportunities and challenges in the coming year.
Key highlights of the episode include:
● Why millennials and Gen Z may finally catch a break in the housing market as regulatory incentives and builder optimism reshape the landscape.
● Preparing for a potential 10% market pullback, driven by an unexpected and significant event.
● Insights on how diversification may lead to opportunities beyond the “Magnificent Seven” tech stocks.
● How the expiration of the Tax Cuts and Jobs Act (TCJA) could impact estate taxes, deductions, and planning strategies.
● How significant advancements in artificial intelligence will begin to reshape productivity and innovation across industries, with companies leveraging AI to achieve unprecedented efficiencies and create new opportunities for growth.
For additional insights and to learn how PAX Financial Group can guide your financial journey, visit http://www.PAXFinancialGroup.com. If you enjoyed this episode, share it with someone who could benefit!
Transcript:
Hey, this is Darryl Lyons, CEO and Co-Founder of PAX Financial Group. And thank you for listening to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information.
Hey, thank you so much, for those that put reviews on Apple, apparently that’s very important. And I actually looked, I never look at the reviews, but I saw some reviews and I was very excited. I saw a one-star review. So, thank you very much for whoever gave me that one star review. There’s this old saying that says if you please everyone, that means you’re lying somewhere.
So, the fact that I didn’t please someone tells me that I’m not lying. So, thank you for the one-star review. It just validated that I’m doing the right thing. But certainly, I wouldn’t mind offsetting that bad review with good ones. We’ve had 27,000 downloads and have had over 100 episodes. Your encouragement, your listening, your feedback, your suggestions, it all encourages me to continue.
So, this is something that, if you’d asked me several years ago, something that I was going to do, I would have said no, because it’s just not my wheelhouse. But I’m encouraged because I feel like I’m giving you something that’s been helping you guys a lot. So, thank you, thank you, thank you so much for listening.
And be sure to leave a review and then tell others about it because, I really believe this is an important content piece for people to navigate these markets. Now, in 2024, I did something called, my top ten convictions. A conviction is a deeply held belief. It’s different from a prediction. And the only reason I say that it’s kind of almost like a weak positioning to be in, to call it a conviction, not a prediction.
But I just don’t think I have a crystal ball. But I do have convictions on what I think might happen, and then you can take it from there. So, let’s go in a top ten format and start with number ten. Number ten, in 2025, I believe that we will have housing hope. What do I mean by that?
Well, right now it’s really hard for millennials and Gen Z to get a home. And that’s really, it’s a clog in the wheel. The prices of homes are higher. You know that there’s higher interest rates. Insurance and property taxes have all gone up. And when you look at your mortgage and hear me out, all of that together can be no more than 25% of your take home pay.
If that number is very important, because it exceeds 25% of your take home pay, you’re going to have to sacrifice in other places, whether that’s giving, saving, spending, whatever. And so, we’ve got a group of, an entire group of young families unable to afford a home in this market. And that hurts. It will either hurt, slowly or hurt all at one time in 2025.
But it will hurt, and it affects the housing market, affects Home Depot, living spaces, landscaping companies. And he really has this ripple effect, as you would imagine. And so, the good news is the surge in home prices have slowed down. But the reality is, we have to create an environment where builders are encouraged to build, and that may require regulatory incentives for them to build.
And I know the current administration is very much focused on reducing the regulatory requirements so that the cost of building goes down and there’s plenty of data to support that. But if you think about it. The developers are an important piece because they’re willing to take all this risk, buy the land, hire the architects, do all the infrastructure with the hope of building and selling houses at a profit.
And so, they have this lag time that they’re in the hole. And if they don’t have optimism and hope, then they’re not going to place that big, big, big bet. Neither will banks back them. So, this idea of economic optimism in the housing market is very important. And we need to do it because the next generation, well, they need homes.
There’s about a $5 million home deficit in our country right now. So we need to build homes. We need to create an environment, a regulatory environment. And that will happen in 2025. Something will trigger a new strategy for homes to be built to meet the demand. And here’s a quote I think is important. Homeownership begins with believing you can purchase a home.
Okay, number nine, I spent way too much time on number ten. I don’t know how I’m going to get through the show, but let’s go faster. Number nine. There will be a scary month in the market. It will be October. A 10% pullback in the market happens about every 19 months. And last year we barely stubbed our toe.
There’s going to be something that happens that’s going to pull the market back this year. And it has to be scary, and it has to be a surprise. Those are the keys. It can’t be scary and not be a surprise. Like the election. No real surprise. Housing market challenges, no real surprise country. Our debt issues in the country.
No real surprise, but it has to be like a big one, a real scary one. Like a cyberattack, a China threat, debt ceiling tantrum that messes up the bond market, a crash in Nvidia. Something scary that’s a surprise has to happen for this 10% pullback. And I just want you to know that’s probably going to happen because it’s just that’s normal.
We just haven’t had it in a while. So, we’re not used to it. So, just remember I’ve talked about this in previous episodes. You can hedge your bets using some structured products. There’s a whole episode on that with all the disclosures and nuances, but that’s something that we use to hedge. And then, of course, do the Monte Carlo analysis with your advisor and look at, what are the probabilities and what’s the magnitude of risk I’m taking in my investment portfolio.
But just know that there’s going to be a pullback in the market. It’s just the law of averages that we’re going to get when we just don’t know what it is. We do know it will be a surprise, and it will be scary. And you’ve got to avoid this language. These are the most dangerous words in investing. Ready, the most dangerous words in investing are ‘this time it’s different’.
So, avoid those words. Have a plan, anticipate it and push through it. Okay. Number eight we’re going to get broadened out. A lot of people ask me if the market is too expensive. And some people say I’m going to wait to put money in. I want it to go down. And so, what does it mean to be expensive?
So, Apple stock is trading at $222. Is it because it’s three digits? It’s $100 or $200. That’s why it’s too expensive. And I can only get X number of shares. The market doesn’t work that way. It’s considered expensive when it’s a ratio of price to earnings. So, you’ve heard that before the price that you are paying for earnings.
And so, under that analysis the stock market is generally expensive. I don’t think anybody can sugarcoat it. But there is a certain degree of conversation there. So, as a whole it’s expensive. But the pockets that are really expensive are technology like the Nvidia’s and Apple’s. But if there’s a lot of other places that aren’t, like if you look at the prices of automobile manufacturers, broadcasting, footwear, insurance, there’s a lot of stuff that’s on sale now.
There’s a reason that it’s on sale, but there’s plenty of places you can even consider international markets or small cap or mid-cap or a lot of different areas that are on sale. It’s pretty expensive. And so, it’s my conviction that we’ve seen this divergence in returns between those tech companies and the others. And if you look at any portfolio, anybody’s portfolio, that was diversified.
There’s some stuff last year that just did not work. It’s my conviction that that stuff will start to work this year. Okay. That was eight, number seven. The tax code will be important and quite possibly could impact you. And here’s the thing about it. The TCJA, the Tax Cuts and Jobs Act, that’s going to expire at the end of the year.
Very important for you to know, there were modifications in the child tax credits. They got rid of the personal exemptions. The estate tax is a big one and standard deductions were awesome. But all those things and I’ll talk a little bit more about it, but all of those things will change if nothing is done and will revert back to the 2017/2016 tax code.
So, there’s a lot to talk about here, but just a couple things I want you to know. I love the standard deduction. It will increase, in fact, in 2025. If you’re single your standard deduction is 15,000 married filing joint, it is 30,000. That’s awesome. It just makes it easier. You don’t have to. Many people don’t have to worry about itemizing or standard deduction.
It’s just a big standard deduction there. So hopefully that sticks. And I think it will because it’s simplified. Everyone likes it. I think that one will stick. Pay attention to your income because the Roth for this year isn’t subject to the expiration of the TCJA, but for this year, the Roth income limits, they went up the phase out ranges.
So, check again to see if you can qualify for making a contribution to a Roth, the big one that you should know about. And you know if you should know about this is estate taxes. This is a big one. I don’t know how we’re going to get around estate taxes with the federal deficit, but if you have an estate that’s 20 million and that includes your life insurance policies, don’t forget about that.
So, if it’s around 20 million, there’s definitely conversations you need to be having with your advisor about what the possible outcomes of the TCJA and how that could affect your estate tax issue for your descendants. Because there’s three possible outcomes. It expires, stays the same or there’s modification. So, I think it’s important to kind of stay on point on that and kind of pay attention to see where things are going.
But the estate tax is a big one for many people because of the expiration of the TCJA at the end of this year. Okay. Number six, it’s going to be cheaper to go to Europe. There’s something called revenge travel that exists out there. That’s called Revenge travel making up for lost vacations during the pandemic in the strength of the US dollar.
I know everyone loves Glenn Beck’s gold stuff. It drives me crazy talking about the dollar crashing just let you know the dollar is very, very strong. It’s always relative to other currencies, extremely strong. Look at the charts, especially since the election. But there’s a lot of interest. Expedia did a report and said there’s a double-digit percentage growth for air travel.
To European cities, and part of which is this strength of the US dollar. Now it doesn’t the strength of the US dollar doesn’t necessarily impact airlines. That has other factors to consider. And hotels have been kind of the same. But if you want to buy stuff like luxury goods or splurge on items, dining, boat rentals, all that stuff can be like 30% cheaper overseas, your dollar can go that much further.
One friend I saw saved more than $200 on a pair of Gucci loafers by buying them in Italy versus the United States. So, the dollar is strong. Again, not a lot of savings to be had in the, like the airline or the hotels. But when you go splurge over there, it’s pretty good stuff. There’s a website I found called The Hotel Guide, a guy out of San Antonio.
Edward Leos does that site so you could check that out. There’s a lot of cool ideas. It’s called the Hotel Guide. I’ll put a link there. Okay. Number five, convictions for 2025, regulatory changes will be moving fast. This one’s kind of easy because we know it’s going to happen with Trump in office. But interestingly, I think it’s important to note that the floodgates of growth do open with reduced regulatory changes.
I know hope is kind of nebulous. It’s not really quantifiable, but it’s extremely important. There’s an old saying that says you can’t love with a toothache. And I would say, I would suggest to you that you can’t grow business without hope. I was a part of the National Federation of Independent Business Owners, a part of their advisory council, and if you ever read their surveys every single year, one of the number one pain points for business owners was the regulatory environment.
And so, if we can improve, make it faster to do permitting and make the regulatory process make sense, business owners will thrive. I know I got frustrated as a business owner a long time ago. This was like ten years ago when I had to fill out this stupid form that did not make any sense. My client wanted to buy a disability, was a doctor who’s very busy.
Disability policies are under the state insurance department and because he was a client, the regulatory body, the SEC, or I guess was FINRA at the time, said that they wanted to do an investment profile and know the risk tolerance of my client, who wanted a disability policy. It drove me insane just because it didn’t make sense.
That’s the type of stuff that kills business owners. And so, I’m excited to see how this regulatory environment will kind of break apart these rules and allow all of us in the small business world to thrive, to have hope, to, ultimately get this thing moving. So that is hold on. Let me see here. That’s regulatory changes.
Five. Let me go to four. Oh, four this is an important one. An important conviction that I have is that data centers are going to move the markets here. Data centers are more, very important. And there’s this law called Moore’s Law by Gordon Moore. He was the co-founder of Intel. He said it’s a rule of technology doubling.
And basically, it refers to the observation that the number of transistors in an integrated circuit doubles approximately every two years. But what does all that mean? It basically means that technology is going to double every two years. It’s turned into Moore’s Law. If that is the case, then we’re in for quite a ride. And all this, our artificial intelligence and all the crypto mining, I mean, you’re going to need data centers.
And these data centers are these dedicated buildings that house computer systems and components and telecom and storage. You’re going to need a ton of them. In fact, I was talking to a friend who has a place out in Castroville and in between Castroville and Hondo. They’re building a Microsoft data center. Why, they’re. Well, first, permitting is reasonable.
There’s not a lot of, you know, stuff like, you know, as you might see in other places, the solar, there’s good solar there too, and there might be good wind. So, you need electricity to make these things work. If you, if you start kind of looking out on the horizon, you kind of put two and two together.
You’re like, okay, well wait, they’re going to need a bunch of data centers. That might be good if you’re in a sprinkler business, right? Because then if you’re a small business, that or even a big business that does sprinklers or, generator business or fuel for generators or, you know, any type of anything that’s needed for data redundancy monitoring.
I mean, there’s just a lot of peripheral businesses that come with data centers. Even the big one. Now, you’re going to hear a lot about nuclear, because what’s the most efficient way to provide these data centers with energy? Yes. Wind and solar. But nuclear is going to be a big part of the equation.
So, if this idea of Moore’s Law is true, then watch out. Data centers and energy are going to be the talk of the town in 2025. All right. Three more. Number three, insurance premiums will go up. I hate to say it, but, you know, all these wildfires in California and hurricanes in North Carolina, all that makes a dent.
I actually had a phone. I had a phone call. I guess it was a zoom interview. And you can see it online where the news four wanted me to talk a little bit about the insurance markets. And it’s really having to do with reinsurance, because what happens with insurance companies is they say, okay. I’m willing to take this amount of risk, but I need insurance for my insurance.
And that’s where you go to something called a reinsurance company. So, when the reinsurance company finds that they’re paying out too much in claims, then their premiums go up. They charge the insurance companies more than the insurance companies charge anymore. So, and my point in that is, a national event affects your insurance company. And the way you navigate this in the insurance world is you have three choices as far as I can see.
If you’re an insurance company, you can just stop selling insurance. They did that a few years ago in the long-term care market. The claims for Alzheimer’s were too high and other types of chronic issues. So, they stop selling long term care insurance. They stopped selling homeowners insurance in California. You could do that. You could do risk mitigation stuff like, okay, if you have this monitoring device in your home, or if you wear these certain watches and you play by our rules and we monitor, you will reduce your premiums.
So, there’s that. But I think what you’re going to see, unfortunately, is just a rise in prices on your automobile and homeowners and umbrellas. By the way, I don’t talk about that enough. Make sure you look at an umbrella policy. So, I think that you’re just going to have to really pay attention to your insurance this year in shop around, check with your advisor, usually your advisor has a relationship with an independent insurance agent.
And you can shop and hopefully reduce some of the costs there. All right. Number two. Number two is school choice. And this is, this is something that’s, you know, conviction that I have for 2025 that’s likely going to happen, namely in Texas. There are 30 other states that already have this. But I think Greg Abbott said he’s got enough votes to get this across the finish line.
The problem is the details. And if people are going to cuss and fuss and ultimately shut it down over the details. But I’m actually on the board for a private school. So, this is interesting because will there be students that come here to a private school as a byproduct of having the extra money to afford the school that otherwise wouldn’t have?
Now, the thing about this school choice as the language is still being modified, it’s not going to affect that many kids. I mean, there’s, you know, 5 million kids enrolled in Texas public schools, and we’re talking about like 40,000, like in version 1.0, it’d be about 40,000 kids. So not a lot. They’ll have multiple versions. And as you would imagine, version 1.0 will be much lower income than many would hope for.
So just know that, you know, the income level is going to be low to start out with. But here’s the interesting thing. It’s likely going to be done through an ESA program, an education savings account, which means that the money, if you qualify, will go into this account that can be used for a broad range of services, like not just private school, but also maybe even online education.
So that’s an interesting way. And it would be very interesting because it would allow those who qualify to be able to not only get private school, but homeschool education. Okay. Number one. Drumroll, please. Number one, Darryl conviction for 2025. Your grandma will be playing around with artificial intelligence. Grandma will finally start fiddling with it, and it’ll freak her out.
And she said she’ll tell you like she’s the first one to figure this out. Have you seen this new artificial intelligence? You’re like mom or grandma. It’s been around for like, two years. You’re just now logging on to Gemini or Claude, but it’s finally hitting mainstream. And the reason this is important is because, collectively, the market has spent the last two years spending, I want to say trillions.
It might be, I know at least last year’s 235 billion in artificial intelligence. And finally, finally, we’re going to see some fruits of that labor, because artificial intelligence has been like this kid you sent off to, Rice, and you’ve been paying for his education for four years, and you’re like, okay, when are you going to start? I want to see some fruit of this investment that I made in your education.
Artificial intelligence has spent the last two, three, five years investing in, building out the infrastructure, the ideas, the chips, everything. And I think finally we’re going to start seeing some fruits of the labor, some cool stuff happen. I mean, we’ve seen it a little bit. I was in San Francisco just recently, and I saw some of these Waymo automatic cars, driverless cars.
We’re going to start seeing maybe not yet, but some humanoid bots, they did one that was called Sophia’s created by Hanson Robotics. And she’s this highly advanced social humanoid robot designed to mimic human expressions, gestures, interactions. She uses AI in conversation, she recognizes faces and even expresses emotion. So that’s way cool. All that stuff gets scary.
I’ve got to tell you, though, mostly I’m excited about, especially if you invest in the markets because not only are these cool things happening, but it’s also going to boost productivity by many companies. I mean, there’s going to be some fallout, but there’s going to be some interesting things that happen. There’s going to be some companies that are going to have $100 million in revenue with 2 or 3 employees, because of the efficiencies of artificial intelligence.
So, I think about it as an opportunity. I know there is some reason to be scared, but change is that fertile ground where both people are scared, and people are opportunistic. So, you decide which one you want, but it’s here to stay and grandma is about to start messing around with it. All right, so the top ten convictions for 2025 there will be housing hope for sure.
Number nine we’re going to have a scary month. Be prepared mentally. Number eight the market will broaden out I believe, to include more than just the Magnificent Seven. Number seven there will be a lot of tax code conversations. And the main one I want you to think about if it qualifies, if you qualify is the estate tax or subject to, I should say, number six, you’re going to consider at least going to Europe to blow your money and hopefully, enjoy some luxury items.
Number five, regulatory changes are coming. I’m a fan of seatbelts. So, there’s a point in which regulation is good, but there’s a point where it’s nonsense. We’ve gotten to the nonsense part, and that’s going to free up hope for small business owners. Number four, data centers are going to be the talk of the town. Number three, insurance premiums will go up.
So be sure to shop. And number two school choice will very likely pass. And number one. Top ten convictions for Darryl for 2025 is grandma will be playing with artificial intelligence. Hey, thanks for hanging with me. I hope you enjoy the 2025 convictions for me personally and, I think as always, that, despite the uncertainty and despite the unknowns and the scariness, you think different when you think long term. Have a great day.
Resources:
Housing Market Predictions For 2025: When Will Home Prices Drop? – Forbes Advisor
Trump wants to fix the housing affordability crisis: Can he? | Fox Business
This Chart Shows How Often Stock Market Corrections Occur | Money
Travel 2025: The Forecast on Pricing is Mixed – The New York Times
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