Stock prices have fallen significantly over the past month. But it doesn’t feel like the selling is over. The market could stay ugly for a while.
Last week the S&P 500 fell 10% below high, marking an official correction. It’s not necessarily a bad thing. Periodic corrections are quite normal and healthy in a bull market. The last correction was in October of 2023. But the S&P still posted a better than 20% return for that year, as it did for 2024 also.
But this feels different. There seems to be more going on than stock prices just consolidating or blowing off excesses to better prepare for the march ever higher after the selling is over. The market environment may be in the early stages of a painful restructuring.
On the surface, things don’t look that bad at all. The market is down because of the technology stocks. That sector had driven the market index higher for most of this bull market. The artificial intelligence catalyst had driven several technology stock prices into the stratosphere. That sector was probably overdue for a comeuppance.
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But the AI catalyst isn’t going away. The technology sector will be back. And these stocks can quickly make up for lost time when it gets going again. Meanwhile, the rest of the market is still doing fine. Eight of the eleven S&P 500 stocks sectors are still higher year to date. The healthcare and energy sectors are having great years, even after this ugly month for the overall market. But the S&P 500 is hard-pressed to go higher while its largest sector, by far, is struggling.
The economic news isn’t that bad either. It’s true that economic growth is slower than previously expected. Inflation is also proving to be sticky (surprise, surprise). But the inflation rate is still trending lower, and the economy isn’t too bad. Plus, a slower economy increases the likelihood of more Fed rate cuts. I believe the market would be fine with that and prepared to rally again if it wasn’t for the uncertainty surrounding the tariffs.
Nobody knows if the tariff issues will last or be quickly resolved. There isn’t even a strong consensus on the extent of the economic consequences if trade wars persist. It will be tough for the market to generate lasting upside traction until the uncertainty dissipates. But it isn’t just the tariffs. There’s something else going on.
The market originally rallied after the election as investors expected a strong economy, spurred by lower taxes and less regulation. Sure, those things would likely take a while to have a tangible positive effect. But the market is good at finding ways to be happy in the short-term. And the new Administration would likely improve the long-term situation.
Sure, the tariffs create near-term uncertainty, and the market doesn’t like that. It’s also possible that those issues could be mostly resolved by this time next week. But Wall Street is slowly realizing something it doesn’t like: The new administration is more interested in fixing structural problems in the economy than it is in taking care of the stock market in the near term.
These structural fixes may be the best thing. We could have freer trade and lower deficits. The administration could be paving the way for a stronger, healthier market that could endure for many years to come. But Wall Street-types suffer from a short-sightedness that can’t be corrected with glasses.
If you tell these people that the market may struggle for a while in order to pave the way for a much better future, all they’ll hear is that the market stinks. The “long-term” concept doesn’t compute. Telling them that things will be great in the second half of 2026 and beyond is like telling them things will be lousy until the year 2070.
This administration is after bigger fish. It isn’t very concerned with short-term market gyrations. That may be the best thing for stocks ultimately. But when the near-term indifference from this supposedly market-friendly administration finally sinks in, Wall Street investors and managers might run for cover.
Anything can happen. The market could take off tomorrow and not look back. But there are powerful reasons to believe the market could struggle for a while. It makes sense to focus on safe stocks that can thrive in any environment. Here are two great ones to consider.
2 Safe Stocks That Can Thrive in Any Environment
Waste Management (WM)
We live in the garbage capital of the world. For some reason, the greatest country in the world generates the most garbage. While the U.S. has about 5 percent of the world’s population, we produce about a quarter of the world’s waste. This country generated 292 million tons of waste in 2018 (the last universally reported number), up from 251 million tons in 2012, and nearly double the waste produced in 1980.
That’s enough waste to produce a pile long enough to go to the moon and back – 27 times. And that’s every single year. Waste services is big business. All that garbage must be collected and dumped or processed constantly. In 2023, the U.S. waste management services industry generated $145 billion in revenue. That was up from $137 billion the prior year, and that number is likely to keep rising.
Garbage will continue to pile up regardless of where interest rates go, the level of economic growth, or the fallout from tariffs. The market could soar or the world could go to Hell in a handbag. Either way, my wife will nag me every week to take out the garbage.
Houston-based Waste Management is the largest provider of solid waste services in the U.S., with $22 billion in annual revenue. It operates a fully integrated system of pick-up routes and transfer stations and has unmatched dominance in landfill ownership with 263 active landfills and 332 transfer stations.
WM has outperformed the S&P in the last three- and five-year periods. But the relative returns may improve going forward. Management anticipates “a step change in the company’s revenue and earnings” for 2025. WM posted 8% revenue growth for 2024 from the prior year but projects 16% revenue growth this year, along with 15% adjusted earnings growth and 17.6% growth in free cash flow at the anticipated midpoints.
AbbVie, Inc. (ABBV)
Healthcare is the ultimate defensive industry. People get sick and take medication regardless of what goes on in the market or the economy. But it’s also a growth industry because of the rapidly aging population.
AbbVie is a U.S.-based biopharmaceutical company formed in 2013 as a spinoff from Abbott Laboratories (ABT). AbbVie is a research-based pharmaceutical company that specializes in small-molecule drugs. It’s a cutting-edge company with a terrific pipeline.
ABBV has outperformed the S&P in a bull market and during trying times for the company. It lost patent exclusivity for its blockbuster immunology drug Humira, which was by far the world’s best-selling drug. The company struggled with uncertain and shrinking revenues and still outperformed the market. But those problems are over now.
AbbVie’s new immunology drugs, Skyrizi and Rinvoq, have already replaced Humira’s peak revenues. In the fourth quarter, Skyrizi and Rinvoq collectively delivered $5.61 billion in revenue. Those drugs alone have replaced the Humira revenue which peaked at a little over $20 billion annually. The company also raised revenue forecasts on the two drugs by $4 billion to $31 billion a year by 2027.
The earnings report showed Abbvie has replaced the Humira revenue and is well on track to strong earnings growth in the years ahead. The patent cliff had been holding the stock back but that’s gone now. The stock was a good performer with serious headwinds. Think how well it can do now.
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