With President Trump’s “Tariff Wars” dominating the investing headlines, many investors missed a small — but absolutely critical — announcement yesterday.

In response to President Trump’s Executive Order, Immediate Measures to Increase American Mineral Production, the administration is officially fast-tracking the first wave of ten domestic mining projects, spanning everything from rare earth elements to battery metals and defense-critical inputs like antimony.

All with the goal of cutting America’s dependency on foreign suppliers, especially China, and unleashing American tech and energy dominance,

The White House framed the move as both a national security and economic resilience play … and the administration is correct —- it’s absolutely vital for the U.S. to develop domestic sources of these critical minerals.

This could mean a potential windfall for investors as the announcement could mark the beginning of a multi-year bull run for U.S.-based mineral producers.

Companies sitting on domestic deposits of rare earths, lithium, antimony, and other strategic minerals could now see reduced red tape, increased government backing, and higher long-term valuations.

Three Ways to Play This News

If you’re looking to position early in this trend, here are three stocks across the market cap spectrum to keep on your radar:

Large-Cap: MP Materials (NYSE: MP)

Why it matters: MP runs the Mountain Pass rare earth mine in California — the only scaled rare earth operation in North America.

What makes it interesting: They’re already producing and processing, which puts them well ahead of the pack. If D.C. is serious about onshoring the tech supply chain, MP is at the top of the beneficiary list. MP’s stock price has already started a bit of a run-up, and with yesterday’s announcement, this movement could have real legs.

Mid-Cap: Piedmont Lithium (NASDAQ: PLL)

Why it matters: Lithium is essential for EVs, batteries, and grid storage — and Piedmont’s project in North Carolina could be a key domestic supplier.

What makes it interesting: They’ve already secured deals with major automakers, and the new permitting push could accelerate their path to production.

Small-Cap: Perpetua Resources (NASDAQ: PPTA)

Why it matters: Their Stibnite Project in Idaho is home to the largest known antimony deposit in the U.S. — a mineral critical for military and energy storage applications.

What makes it interesting: Antimony isn’t a “sexy” metal like uranium or lithium but the government has already flagged antimony as a strategic priority, which could put Perpetua in the spotlight for grants or defense contracts.

Wildcard: NioCorp Developments (NASDAQ: NB)

Why it matters: NioCorp is developing a project in Nebraska targeting niobium, scandium, and titanium — all high-value, low-availability critical minerals.

What makes it interesting: This one’s a more speculative play. NioCorp’s projects have been stalled due to financing issues, but with the White House putting a thumb on the scale, companies like NioCorp could suddenly find themselves back in the game.

Bottom Line

Washington is sending a clear signal: domestic mining is back in favor — and potentially back in business. With Uncle Sam’s limitless credit card heating up and President Trump’s pro-business, deregulatory policies coming into play, we could be entering a new era of American-made supply chains for critical minerals.

For investors who want early exposure to this looming megatrend, now’s the time to pay attention.

Disclaimer: The author has no financial interest or position in any of the companies mentioned in this article. This content is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell any securities.

The stock market has taken a beating thus far in March, with the S&P already down 8.6% from its February peak. Worse yet, all the major indexes have fallen back to their pre-election levels.

Not surprisingly, this has led to a rising tide of pessimism about the market and the economy, including increased fears that the U.S. may soon fall into a recession.

That anxiety is clearly seen in the Cboe Volatility Index, commonly known as the stock market’s “fear gauge.” As of March 11, it’s up 62% for the year.

However, Yardeni Research, a respected investment strategy consulting firm, is more optimistic and suggests that investors take a longer-term view.

Betting on the Resilience of the U.S. Economy

As the firm said in a note released in the second week of March, “We continue to bet on the resilience of the American economy. We expect that pro-business policies, as they emerge, will boost longer-term confidence, allaying short-term uncertainties related to Trump 2.0.”

Much of the blame for the market’s woes is falling on President Trump’s tariff policies and the uncertainty they have created.

According to Tom Essaye of the financial research firm Sevens Report Research, it’s not the tariffs themselves that are causing all the trouble. He says it’s “the sort of just complete chaotic, whiplash-infused, seemingly directionless policy. That’s the issue.”

Michael Arone, chief investment strategist at State Street Global Advisors, echoed those concerns saying, “Many investors support the president’s pro-growth business agenda, but the administration’s frenetic approach to policymaking is unsettling.”

President Trump: “What We’re Doing is Very Big”Another factor is the President’s apparent willingness to accept a recession as the price to be paid to bring America back from the brink of disaster. On Fox News’s “Sunday Morning Futures,” President Trump told host Maria Bartiromo that the U.S. should expect a “period of transition” as his policies take effect.^[1]

And indeed on February 28, the Federal Reserve Bank of Atlanta’s GDPNow model forecast a 1.5% contraction in real U.S. gross domestic product in the first quarter of 2025.^[2]

The president’s willingness to accept the possibility of a recession took many by surprise. As Sevens Report Research’s Tom Essaye told Barron’s, “It appears that the administration has a higher pain tolerance than perhaps the markets assumed initially.”

However, like Yardeni Research, the President is taking a long-term view, telling Bartiromo, “What we’re doing is very big. We’re bringing wealth back to America. That’s a big thing… it takes a little time, but I think it should be great for us.”

Expect a Rally in the S&P

For its part, Yardeni is bullish on the economy and the markets. It says there is only a 20% chance of a recession and an 80% chance of “outcomes that are bullish for U.S. stocks.”

Yardeni’s optimism is shared by Neil Shearing, group chief economist at Capital Economics. According to Shearing, “While the outlook has clearly soured, we think fears that the global economy is on the cusp of a major slowdown are overdone.”

Capital Economics does expect U.S. economic growth to slow to between 1.5% and 2% in 2025. This is “weak by U.S. standards,” according to Shearing, but it’s “well above the rates of growth experienced in Europe.”

Furthermore, Capital Economics expects “a renewed tech-led rally in the S&P 500 over the course of this year.”

This optimism is shared by investment advisory firm DataTrek Research, which while noting the market’s current problems in a note, also says, “we are in the bullish camp on this point, and remain positive on domestic large cap equities.”

The bottom line is despite turbulence in the financial markets, investors would be well served to avoid succumbing to short-term fears and to take a long-term approach instead.

Investors who are able to weather the current volatility may ultimately find themselves well-positioned when optimism returns to the markets in the months ahead.

The stock market has been in turmoil for the last two weeks thanks to uncertainty about the President’s trade policy… followed by widespread surprise at the extent of Trump’s trade war, as he announced higher tariffs on friend and foe alike.

Since its February 19th peak, the S&P has fallen more than 17% — wiping out trillions of dollars in wealth in just a few weeks and taking the S&P back to nearly 10% below where it stood on the day Trump was elected.

Despite the market’s collapse, the President has said, “I’m not even looking at the market.” He and his advisors believe the pain investors are enduring will be short-lived and more than made up for by a market boom that will follow a reset of global trade agreements.

The President Cares More Than He’s Willing to Admit

However, some financial experts are skeptical that the President doesn’t care about the stock market’s performance.

Take Tom Lee, the co-founder and head of research at Fundstrat, an independent financial research firm. Lee is famous for his near spot-on forecasts of where the S&P would finish in 2023 and 2024.

In a message to his clients, Lee wrote, the “market fury is not due to a reaction to a trade war, but rather, in our view, the fact the White House broke a core covenant of capitalism — stable and predictable regulatory environment.”

According to Lee, Trump wants the market the rally in order to validate how he’s handling global trade. He also needs public support, which according to some polls is beginning to wane.

Furthermore, a market crash could also have the potential to help cause a recession, which is the last thing Trump wants.

Declining Market Could Cost Republicans Control of Congress

Also important is a rising fear that if the President’s policies don’t get fast results, the Republicans could lose control of Congress in next year’s mid-term elections.

That’s exactly what happened to Republicans following the McKinley tariffs of 1890 and the Smoot-Hawley Tariff in 1930.

In the 1890 mid-terms, Republicans experienced a landslide defeat, losing nearly half of their House seats.

In the 1932 elections that followed the enactment of Smoot-Hawley, Republicans lost control of both houses of Congress. And both Senator Reed Smoot and Representative Willis Hawley lost their seats.

The fallout from Smoot-Hawley is especially galling to Republicans as it helped usher in decades of dominance by the Democratic Party.

It seems unlikely President Trump is willing to risk that kind of legacy for himself.

With that in mind, Lee expects the President to moderate or even reverse his trade policies if the market continues to fall.

O’Leary: “Everybody’s Willing to Cut a Deal”

And he’s not alone. Billionaire “Shark Tank” star Kevin O’Leary believes the tariffs are part of a larger negotiation package and that the President will quickly negotiate his way towards removing or reducing them.

As O’Leary told Fox Business, “I believe in economics driving everything at the end of the day, and I don’t think the Trump administration is stupid. They know they’ve gotta start negotiating deals and show the world what the outcome of this is gonna be.”

As a result, O’Leary expects U.S. trading partners to race to the negotiation table. As he put it, “Everybody’s willing to cut a deal.”

Meanwhile, influential voices such as Lloyd Blankfein — former Chairman of Goldman Sachs — is urging the President to delay the tariffs by at least six months to provide adequate time to negotiate new and better trade deals.

He’s been joined in his calls for a tariff pause by billionaire hedge fund manager Bill Ackman — who supported Trump’s 2024 campaign, and has taken a great deal of heat for doing so.

The Commerce Secretary’s Head May Already Be on the Chopping Block

According to FundStrat’s Tom Lee, the President may already be laying the groundwork for pulling back. And he may even have a fall guy if the markets continue to tank.

Lee cites a report from Politico saying that, according to White House sources, Commerce Secretary Howard Lutnick — an especially loud supporter of the tariffs — could be poised to take the blame.

Insiders reportedly blame Lutnick for the unexpected severity of the tariffs, which go beyond anything Wall Street expected.

The bottom line is that even if the President’s trade policies continue to tank the stock market, he will eventually reverse course, either because he is successful at negotiating new trade agreements or simply out of political necessity. And that could be sufficient to send the market soaring to new highs in the months ahead.

The bogeyman of AI stocks has been summoned.

In late January, Chinese artificial intelligence company DeepSeek released an open source Large Language Model rivaling OpenAI’s ChatGPT, Google’s Gemini and Meta’s Llama.

The LLM, which was supposedly developed in only a few months with a budget under $6 million, is significantly more efficient than competitors and, consequently, 20 to 50 times cheaper to use than OpenAI’s o1 model.

The stock market’s reaction to the DeepSeek release was immediate, and, for a hot minute, there was blood in the streets on stocks even tangentially related to AI.

Tech darling Nvidia’s (NASDAQ: NVDA) shares plummeted nearly 18%, marking the largest single-day loss in its history and setting a new record for the biggest one-day loss for a single company in U.S. stock market history, erasing approximately $465 billion from Nvidia’s market cap.

The day’s other big losers included Vistra Corp (NYSE: VST), an electricity generation conglomerate with significant nuclear power holdings, and Arista Networks (NYSE: ANET), a purveyor of (among other things) cloud networking services for large AI data centers.

As if that wasn’t enough for the poor, beleaguered markets …

… after a small bounce back, additional volatility hit the market later that week as President Trump announced tariffs on trade with Mexico, Canada and China.

The tariff threat was later rolled back (for now) … but many retail investors are still reeling from the amount of uncertainty injected into the markets in a relatively short period.

So what’s the best way to take advantage of the trend?

3 Ways to Play a Crazy Market

If you’re looking to protect your portfolio while still capturing upside, you have a few options.

1. Defend

When markets get choppy, stable, dividend-paying stocks could help smooth out the ride.

Companies that sell essential products or services like food, beverages, and personal products tend to weather stock-market hurricanes with a reassuring stability.

Johnson & Johnson (NYSE: JNJ) is a classic example. With its mix of pharmaceuticals, medical devices, and consumer health products, JNJ has reliably provided investors with a port in the storm for decades.

Plus, with a 3% dividend yield and a low beta of 0.55, it provides reliable income and lower volatility — an excellent safe harbor in turbulent times.

Another “classic” example would be one of Warren Buffett’s favorite investments — Coca-Cola (NYSE: KO). This beverage behemoth has provided Buffett with stunning returns in the vicinity of 2,437% over the last few decades … while providing up to $700 million in dividends annually.

Neither stock dramatically outperforms the S&P until you zoom your chart out to 30+ years … but then again, the S&P doesn’t pay dividends.

If you are looking for longer-term, reasonably reliable gains while also receiving an income from dividends, playing “defense” could be a good strategy for your portfolio.

2. Parry

In fencing terms, a “parry” is a move that both defends and sets up for an attack … and that might be just the right move for a certain type of investor when the market’s going nuts.

This type of investor might consider using that volatility to their advantage by “buying the dip” when a high performing stock with solid fundamentals suddenly lurches downward.

In the DeepSeek panic noted above, several solid companies plunged more than 15% … but a few days later two of the three had rebounded as much as 20% from trough to peak.

Investors who kept their wits about them during the chaos of trading on January 28 had the opportunity to pick up some well performing, large cap stocks at a pretty decent discount and see an immediate ROI.

This is a more aggressive play, so be cautious as you are doing your due diligence on a potential investment; more than one investor has bled trying to catch a falling knife.

3. Attack

The most aggressive play — the high risk, high reward option — is to lean into the volatility and try to seek out an aggressive growth stock in the sector that’s primed to deliver outsized returns.

For example, President Trump’s outspoken desire to unleash American energy as a tool for American prosperity has the potential to dramatically affect the domestic oil and gas landscape.

His “Drill, baby, drill!” rhetoric hasn’t yet moved the needle for major producers like Chevron (NYSE: CVX), Occidental Petroleum (NASDAQ: OXY) or ExxonMobile (XOM) … but some smaller producers like Prairie Operating Co. (NASDAQ: PROP) have seen dramatic double-digit stock growth over the last month.

The growth isn’t the only thing dramatic about Prairie’s chart. The more observant readers will notice that the swings between company’s peaks and troughs are significantly larger than the bigger producers … but in that volatility lies the potential for what could be explosive growth.

Warning: Math Ahead

As of this writing, the stock is sitting around $8.60 with a $197.38 million market cap. The company released a 2025 EBITDA forecast between $100 million and $140 million and capex estimated at roughly $100 million for 2025. Additionally, the company has relatively low debt.

Based on a valuation formula called the Enterprise Multiple, some back-of-the-napkin math indicates that the company is currently trading at a 1.58x-2.21x multiple.

What does this mean?

It suggests that PROP is potentially undervalued compared to its peers — trading at a relatively low multiple compared to the broader oil and gas industry, which typically sees EV/EBITDA multiples between 4x and 8x.

If the company’s stock starts trading more in line with the industry average, the market cap could shoot up anywhere between $396 million to $1.096 billion.

That’s a huge range … and it’s not guaranteed that Prairie will ever hit those lofty heights.

But with Trump shouting from the rooftops that American energy is going to see a renaissance … this company could potentially be an aggressive investor’s vehicle to fairly significant returns.

The bottom line?

No matter how you choose to play market turmoil — defend, parry or attack — volatility isn’t necessarily something to fear …

… It’s something you could potentially profit from.

Make a plan, do your due diligence, then execute.

Famed investor Cathie Wood’s ARK Invest made headlines earlier this week with a significant adjustment to its portfolio, notably selling off its holdings in small module reactor (SMR) tech company Oklo Inc. (NASDAQ: OKLO).

Oklo, a nuclear power startup backed by OpenAI’s Sam Altman, has surged recently, rising 20% to $31.25 on January 21 and an additional 6.6% to $33.27 early on January 22.

The company is up as much as 311.65% over the last six months, blowing away competitors in the uranium and nuclear energy space as well as indexes like the S&P.

Nuclear power start-up Oklo Inc. has outperformed the market over the last six months, handing certain investors significant returns. Source: Barchart.com

Notably, at the same time Wood was locking in her profits with Oklo, ARK Invest increased its position in Cameco Corporation (NYSE: CCJ), one of the world’s largest uranium producers.

It’s surely no coincidence that this repositioning happened a day after President Trump announced a potential $500 billion private sector investment to fund infrastructure for AI, including a joint venture called Stargate with OpenAI, SoftBank, and Oracle.

This AI infrastructure initiative is expected to dramatically boost electricity demand, with tech giants looking to nuclear power as an inevitable solution.

That “inevitability” could be why Wood has reconfigured her portfolio away from the explosive but unproven tech company (Oklo) to the staid but profitable commodity play (Cameco).

Though in the same general sector — nuclear energy — the two companies are an exercise in contrast.

Despite making certain investors a tidy profit with its triple-digit stock price growth, Oklo is pre-revenue and has no definitive sales agreements as of the time of this writing. And though the company’s investor materials note that it is making good progress toward its goals, it is still burning cash at the rate of approximately $24.9 million a year.

Compare that to uranium giant Cameco — a far more established company that is revenue positive (to the tune of $2.8 billion in the most recent fiscal year) with a profit margin of about 4.17%.

ARK Invest’s nuclear shuffle could simply be an exercise in locking in profits from a higher risk, higher reward investment then reallocating to a lower risk investment that still has the potential to outperform the market in general, as Cameco has done over the last 2-3 years.

But it is interesting to note that the strategy involves moving away from a specific technology and toward a company that is going to fuel that technology.

By way of analogy, it could be akin to selling Ford or GM in favor of investing in the one thing both companies’ products need: gasoline.

Oil and gas companies like Exxon and Chevron have provided investors with significantly more attractive returns over the last 35 years than automotive stalwarts like Ford and GM. Source: Barchart

ARK Invest’s partial divestment of a nuclear reactor tech company in favor of a uranium producer could be an exercise in risk reduction … or it could be a sign that Wood expects uranium producers to break out sooner rather than later.

Either way, one thing is for sure: One of America’s most famous investors appears to be bullish on the country’s nuclear future.

The stock market did something amazing in 2024.

Something it hadn’t done in a quarter century…

No kidding.

The market, as measured by the S&P 500 put in back-to-back 20% or higher gains.

In 2023 the S&P 500 closed up 24%. Last year it added another 23%.

Want to be even more impressed?

Since the index was founded in 1957, it has only accomplished this incredible feat of strength six times. That’s around once a decade on average.

So what does that portend for the coming year?

Let’s look at a couple influencing factors.

That Last Time…

The last time investors were popping the bubbly over back-to-back gains like this was in good old 1999.

We suspect every investor over 40 remembers what happened after that…

The turn of the millennium brought with it the bursting of the internet bubble and ushered in the era of what’s fondly become known as the “tech wreck” — the kickoff of a decade-long bear market.

Now to be fair, the initial bear leg bottomed after only two years and a 47% washout. And while the ensuing rally attempt got off to a great start gaining 26%, the next four years put in more modest gains ranging from 3% to 14%.

The building optimism, however, was short-lived when the market was clubbed like a baby seal in 2007 by yet another exploding bubble — the housing/mortgage bubble and the disaster known as the Great Financial Crisis — which cost the market 37%.

All in all, the years between 2000 and 2009 were nothing to write home about. From the final high to the final low, the index lost nearly 50% of its value.

And it all came on the heels of back-to-back 20%-plus gains.

Is it time to get nervous?

Sons of the Tech Bubble

When we look back at those dismal years, it’s important to note that four of those six 20%-plus performances were all put in between 1995 and 1999. THAT… is unprecedented.

Of course the tech bubble was the era of the new investing paradigm. When insane valuations didn’t matter anymore because it was all about the internet — and that was going to change everything.

Of course it didn’t.

Hundreds of stocks trading at thousands times earnings will never be profitable. Ever. The pretenders were dispatched in short order.

And in a potentially great irony, today’s multi-year performance might actually be considered an offshoot of that bubble. Because it’s being driven by a select number of mega-tech companies that survived the bust and grew up out of the boom.

You know them today as the “Mag 7” — multi-trillion dollar market cap monsters. (With Tesla and Meta playing catch-up.)

These “big dogs” have fully been the driving forces behind both years’ successes.

They’ve been such forces they’ve been able to push the market higher even in the face of the Fed’s manic rate hike cycle.

They’re able to do this because they’ve got so much cash in their war chests, they don’t give a hooey about higher rates. Case in point, Microsoft has already indicated they plan to spend a cool $80 billion on data center expansion in 2025. That’s a 44% increase from last year.

And that’s not all. According to Morgan Stanley Amazon could spend $96.4 billion… Google could spend $62.6 billion… and Meta could spend $52.3 billion.

Fed looking to dial back rate cuts in 2025? They don’t seem to care.

And why not?

Because they’re all jockeying for position in what might well become the next great bubble…

AI.

Investments in the nascent technology have been pretty rampant, and with good reason:

The industry is still in its infancy, but Wall Street’s forecasts suggest AI could add anywhere between $7 trillion and $200 trillion to the global economy during the next decade.

Those are big numbers.

But they’re also forecasts (best guesses).

And in chasing their share of the pie, the valuations of these companies driving these supers-sized gains are starting to become a little rich.

The 2024 PE for the Mag 7 came in around 40 vs 27 for the entire index. Forward PEs see valuations coming off a bit to 32.3 and 23.2 respectively.

Now, these rising PEs aren’t exactly 1990s tech bubble rich, but rich nonetheless. And the extensive capital expenditures will have the effect of eating into future margins. As reported in Reuters…

“I think what investors are missing is that for every year Microsoft overinvests – like they have this year – they’re creating a whole percentage point of drag on margins for the next six years,” said Gil Luria, head of technology research at D.A. Davidson.

Typically investors don’t see a bubble until it’s in their rearview mirror. And what would one look like in this case anyway? A move to more reasonable valuations within the Mag 7 would likely make for a year (or more) of struggles in the broader market.

On the other hand, if the index can complete the 20% trifecta this year that means S&P 500 levels around 7050.

Stay tuned…

They were NEVER buying it!

The year 2024AD was supposed to be the year of rate cuts. Until the fly of sticky inflation early on flew into that ointment.

By September, the Fed figured it couldn’t wait any longer and got down to business. They assured everyone that…

Our patient approach over the past year has paid dividends: Inflation is now much closer to our objective, and we have gained greater confidence that inflation is moving sustainably toward 2 percent.

Then they tried playing catch up by cutting rates 50 basis points.

With that they embarked on their quest for their next holy grail — “neutral.” According to the Fed, “neutral” a theoretical interest rate level that neither slows the economy nor lets it overheat. Like we said, it’s the holy grail.

It’s also a level they admit they don’t have a clue about.

No matter. They’re paid to do this kind of thing.

They’ve insisted they need to do this because their focus has shifted to the employment side of their mandate. According to Chair Powell…

As inflation has declined and the labor market has cooled, the upside risks to inflation have diminished, and the downside risks to employment have increased. We now see the risks to achieving our employment and inflation goals as roughly in balance, and we are attentive to the risks to both sides of our dual mandate.

Translation: “Don’t worry. We got inflation. Now we have to do employment. After all, we can’t be pushing the economy into a recession…”

The Reality Behind the Search for “Neutral”

This, of course, is all “narrative” — that is to say mostly BS. Inflation is still sticky by any number of measures. The real reason they need to lower rates is because levels above 5% are literally killing the Treasury.

In 2024, the US Treasury rolled over roughly $8 trillion of debt. And not just any debt. It was roughly 2% debt that was being refinanced into nearly 4% debt (assuming maturities stayed relatively the same). You don’t need to be a math genius to realize this is a lousy trade where debt goes.

But always the crafty one, Treasury Secretary Janet Yellen forged a workaround by rolling more than 84% of it (old debt plus new financing) into short-term bills — securities maturing in 6 months or less.

Basically she was willing to pay up for a few months until Powell and company came up with a story to get rates lowered. The plan is not faring so well.

Because this year (2025) about another $3 trillion in debt will be coming due… Along with a bunch of debt rolled into short term paper last year.

Putting this in simple terms… The Treasury has another boatload of borrowing to do this year.

In any case, the Fed had been spinning their story of conquered inflation and bringing rates down to neutral levels and feeding it to the media. Who in turn have been dutifully parroting it in all their reporting.

But… there has been one huge disbeliever in the whole bunch…

The Bond Market

Back in September, when the Fed was insisting that they had it all under control and rates (including yields on Treasury debt) could safely come down — the bond market effectively flipped them the bird.

You can’t make this up… The very day the Fed commenced cutting, bond yields in the 10-year (the benchmark lending instrument) bottomed and started their trek higher.

The other factor is the massive amount of debt that will eventually be hitting the market this coming year. Supply and demand are still a thing.

Lately the Fed has been trying to walk back rate cut expectations for 2025. It seems they’ve come to grips with the reality that maybe it’s not quite time to go out in search of “neutral.”

The bond market never bought it in the first place.

Walgreens is a dog…

In fact it’s been a dog for the better part of ten years now.

Walgreens Boots Alliance (WBA) – Monthly

In 2024, it earned itself a spot in the annual “Dogs of the Dow” portfolio. And it was, in large part, the reason that portfolio underperformed, losing 3% while the average as a whole was up nearly 13%!

The company lost over 64% on the year.

It’s lost just over 90% of its value since mid-2015.

The reasons for its tale of woe have been developing for a number of years and basically boil down to two factors: bad business decisions and struggles within the industry.

But it, like some other once-big names, has come to realize the error of its ways and is working to make a turn around.

Can they make it happen?

The Struggling Fall from Grace

The bad business decisions started all the way back in 2020 when Walgreens invested $6 billion for a majority ownership stake in a doctor-staffed clinic operator called VillageMD. The strategy followed an industry trend connecting medical service providers to pharmacies to create one-stop health solutions.

The plan was, “to open 500 to 700 “Village Medical at Walgreens” physician-led primary care clinics in more than 30 U.S. markets over five years.”

Business did not grow as projected. In the first three quarters of 2024, Walgreens’ operating loss grew to $13.1 billion.

A bigger issue, however, has been one that’s hitting the whole industry… getting paid.

In the drug business, the vast majority of prescriptions are paid for by insurance rather than customers directly. To that end, insurance companies hire “middlemen” known as pharmacy benefit managers (PBMs) who negotiate discounts and rebates from drug manufacturers and then set prices with pharmacies.

The PBM industry, dominated by three companies (all owned by insurance companies), exerts a huge amount of pressure on the pharmacy industry. And its been doing so for — wait for it — the past 10 years. About as long as Walgreens has been taking it on the chin.

According to reporting:

The reimbursement pressure that Walgreens experienced can be seen in its U.S. retail pharmacy gross margin, which fell from 28.2% in fiscal year 2014 to 17.9% in fiscal year 2024, ended in August.

That’s a problem.

Is a Turnaround in Progress?

In the face of talk that it could be bought out by a private equity company, Walgreens has been taking some serious steps to right this ship…

Plans to expand have been sharply curtailed and as newly-installed CEO Tim Wentworth informed the market:

“We believe in the future of these businesses and intend to remain an investor and partner [in VillageMD], but as part of our persistent focus on value creation for WBA, we are collaborating with leadership toward an endpoint to rapidly unlock liquidity and enhance optionality and position them for additional growth.”

Understanding the need to cut bad investments is always a good first sign of a serious turnaround. But in addition, the company is also slashing internally:

The company said last quarter that it surpassed its goal of reducing expenses by $1 billion and announced a plan to shutter nearly 14% of its store locations. It will close 1,200 of its 8,700 stores that it said are unprofitable over the next three years, including 500 stores in fiscal 2025, which ends in August.

Again, early signs are promising.

Last week, Walgreens reported its first quarter earnings (ending Nov 30) and gave Wall Street a pleasant surprise.

EPS came in at 51 cents vs. the street’s estimate of 37 cents. Revenue was a huge beat as well coming in at $39.46 billion vs. $37.36 billion.

That was the good news. The less than glowing news was that the company didn’t change their earnings outlook for 2025. Nor did they include sales guidance in their report. (Last October they guided at $147 billion to $151 billion for FY 2025.)

Still, you gotta take your good news where you can.

And the market did.

Walgreens Boots Alliance (WBA) – Daily

How they deal with the issue of reimbursement will remain to be seen.

But for now, WBA may be worth keeping an eye on.

While financial gurus like to sound like they have some special insight into the market, no one has a crystal ball.

We’ll be the first to admit it.

Investing is about doing your due diligence.

Of course there are tools that can give a savvy investor some inside clues about the market.

It’s a little known technical indicator that measures an important statistic known as “market breadth” called the Advance/Decline Line.

It’s a tool that actually can give you a glimpse at the internal strength or weakness of any market. And best of all, it’s super-simple to use…

A Look “Inside” the Market

Market “breadth” shows the relative participation in a market move by measuring the number of shares that are moving higher versus the number moving lower — in other words whether a rally is broadly-based or being driven by a few big stocks.

The math on this is ridiculously simple.

You just take the number of shares going up (usually over a trading session) and subtract the number of shares that went down. Then add that number to the previous day’s number.

Voila! Instant market insight.

The A/D line (as it’s known) can be a leading indicator by showing a deterioration in market strength if it starts to lag as prices are making new highs. It can also show accumulating strength in a bear trend by holding previous lows while prices are still heading lower.

Now that you understand the principles behind this indicator, let’s take a look at the A/D lines for four major indexes…

Four Indexes — Four A/D Lines

Let’s start with the big dog…

S&P 500

Look at the A/D line in the first circle compared with the price action. Market breadth appeared to be weakening as the A/D line couldn’t reach a new high with the market. It eventually did post a new high, but then fell off sharply as the market stalled.

Right now the indicator appears to be relatively in line with the price action of the market. But continued weakness into the new year could mean more internal weakness.

Dow Industrials Average

The Dow Industrials is only a 30 stock index, but it also contains $12.5 trillion in market cap with Nvidia, Apple, Microsoft and Amazon. So it’s got some pretty mega-tech companies to drive it.

You can see the upward price bias throughout November, while the A/D line stayed basically flat. Year end profit taking pulled prices a bit back in line. But absent a confirmation by the indicator, new highs in the market should be viewed cautiously.

NASDAQ Composite

If you want a look at a troubling chart, look no further than the Nasdaq Composite. The Nasdaq is a capitalization-weighted index of 2,500 companies that lean heavily toward the tech sector.

The index was up over 30% in 2024 while its A/D line had been heading significantly lower for most of the year.

The price action is closer to what we’ve seen in the S&P 500 (another market-cap weighted index) but given the index contains 5-times as many stocks, this divergence between price and AD line drives home the fact that the rally is still in the hands of a handful of mega-tech companies.

Russell 2000

The Russell 2000 is an index of small cap companies.

Small caps have been struggling. While the S&P 500 gained over 24% last year, the Russell Index managed less than half that rallying 10.8%. Here you can clearly see the divergence between the A/D line and the price action of the index. New price highs were made, but market breadth didn’t support it.

The pullback has brought prices back into line somewhat, but the fact that the A/D line has moved so far below previous lows may be indicating the market is still under some stress.

As Always: One Caveat…

To be sure, this indicator is not the “holy grail” of investing. There are no sure things.

When it comes to the markets, “only price pays” — no matter what your indicators may be telling you, price is the only indicator that really matters!

Everything in your technical arsenal could be screaming “sell, sell, sell,” but if the market keeps going higher… It’s going higher. (Have another look at the Nasdaq Composite chart!)

It’s no secret that for the past two-plus years, it’s been basically a handful of stocks — the AI/mega-tech sector — that has been pulling the market higher. And they’ll continue to be an influence.

But all that said, technical indicators like the advance/decline line can offer important insights into what may be building internally in the market.

And that’s always important for a smart investor to know.

Every year as we get around to pinning a new calendar to the wall, financial writers start focusing on two topics… the big events from the year gone by and the big opportunities for the coming one.

Many sites will make calls on certain stocks based on things like developing trends, companies’ past performance, and just enough analysis to justify their logic.

(In all cases, we recommend that you always do your due diligence before investing in any opportunity, to make sure it fits in your investment goals and risk profile.)

We don’t do that. But…

If you are interested in a small group of stocks that has the potential to outperform one of the major market indexes, there’s a strategy we’d like to introduce you to…

The “Dogs” of the Dow

What’s that?

The “Dogs” concept was popularized in 1991. It’s an investing strategy that looks to outperform the Dow Industrials by buying the 10 stocks in the index with the highest dividend yields.

Why would this be a good idea?

A company’s dividend yield is its annual dividend divided by the share price of the stock. Let’s say Company X pays a $2.50 annual dividend and is currently trading for $27. That means it has a 9.2% dividend yield.

However, if Company X is trading for $19, its dividend yield would be over 13%.

So a higher dividend yield generally indicates a lower stock price.

Remember, the Dow Industrials is an average of 30 of the bluest of the blue chip companies in the market. All solid, well-capitalized companies. Not a high-risk name in the bunch.

So when one of these stocks’ dividend yield rises, it usually means its price has come under some cyclical or temporary pressure. Which should make them poised to outperform the market as their share prices recover.

How does it work?

The Dogs of the Dow is basically a “set it and forget it” strategy. You buy the Dogs in January, hold them through the year, and then adjust your holdings for the following year.

Simple.

But how does it perform?

You might be surprised.

A Pretty Impressive Record

In an era of Nvidia-like return expectations, a lot of investors think of dividend paying stocks as “stodgy” companies that can’t keep up the growth pace with the rest of the market. But these “Dogs” have done pretty well relative to the DJIA index.

Between 2007 and 2009, the Dogs portfolio was beaten by the Dow, but…

In 2010 it was Dogs up 16% – Dow plus 9%…

In 2011 the Dogs beat the Dow by 11 percentage points…

In 2012 it was a dead heat with both rising roughly 10%…

In 2013 it was the Dogs again closing up 35% vs the Dow’s 30%…

In 2014 it was a closer contest with the Dogs up 11% and the Dow up 10%…

In 2015 the Dogs gained 3% while the Dow was flat…

In 2016 it was Dogs up 20% and the Dow up 17%…

In 2017 the Dogs took it on the chin gaining 19% vs. the Dow’s 25% rise…

In 2018 the Dogs fell 1.5% while the Dow dropped 6%…

In 2019 the Dogs managed a 15.4% gain while the Dow posted a 22.3% rise…

In 2020 the Dogs got clobbered losing 12.6% while the Dow gained 7.2%…

In 2021 the Dogs got some revenge rallying 25.3% compared to 21% for the Dow…

In 2022 it was Dogs plus 2.2% – Dow minus 8.8%…

And in 2023 the Dogs got edged gaining 10.1% vs the Dow’s 14.4% move.

Overall, according to Nasdaq, “From 2000 to 2022, the Dogs of the Dow had an average annual return of 8.7% compared to 5.8% for the Dow Jones Industrial Average (DJIA).”

What about last year?

In 2024 the Dogs were, well… dogs. The portfolio lost 2.97% while the Dow as a whole was up 12.8%.

Their performance lagged in large part on the backs of healthcare/pharmaceutical stocks. Amgen was down 9.5% and Johnson & Johnson fell 7.7%. But the biggest loser in the bunch was Walgreens which took a huge 64.3% hit thanks to a combination of bad business decisions and industry pricing pressures.

Chemical conglomerate Dow Inc. also took a dive dropping 26.8%.

The only two tech stocks, IBM and Cisco gained 34.4% and 17.2% respectively.

One of the chief criticisms of the strategy is that it may overweight an investor in one particular sector. That appears to have been a factor.

But it’s also worth noting that the Dogs have a tendency to bounce back. If you look at the returns above, the Dogs portfolio got its butt kicked in 2020 only to rebound to outperform in 2021. (And Walgreens got dropped from the index.)

So are the Dogs of the Dow right for you?

Only you can determine that by doing your due diligence.

But if you are interested in looking into this unique portfolio, here are the Dogs for 2025…

Verizon (VZ) — 6.78%

Chevron (CVX) — 4.50%

Amgen (AMGN) — 3.65%

Johnson & Johnson (JNJ) — 3.43%

Merck (MRK) — 3.26%

Coca-Cola (KO) — 3.12%

IBM (IBM) — 3.04%

Cisco Systems (CSCO) — 2.70%

McDonalds (MCD) — 2.44%

Procter & Gamble (PG) — 2.40%