More Choppy Waters Ahead
The market has been recovering since it fell into correction territory earlier this month. The S&P was up for the week last week for the first time in a month and Monday was a strong day. But we might not be out of the woods yet.
Even if the bottom is in (which it might not be), it is unlikely that stocks can generate lasting upside traction until there is more clarity on the tariff situation. But the market really hasn’t been as bad as it might seem.
Uncertainty about the tariffs certainly contributed to the recent correction. The tariffs are hitting an economy still struggling with stubborn inflation and diminished growth projections. But this market was probably due for a correction anyway. The S&P had rallied over 70% in a little more than two years. These selloffs are common and healthy in a bull market.
Plus, the market was driven lower by technology stocks. The sector is by far the largest of the eleven S&P 500 sectors. It accounts for about a third of the index. Technology had driven the index higher for most of the bull market and those stocks were especially due for a comeuppance, especially the artificial intelligence beneficiaries.
In fact, most stocks aren’t having a terrible year. Eight of the eleven S&P sectors are higher YTD. Plus, the economic news is improving. The February CPI inflation report was better than expected. Retail sales showed the economy is slowing, but not too much. Those two things make Fed rate cuts more likely. The market may be good to go if it can get beyond the tariffs.
The tariff clarity could arrive soon. Stocks rallied strongly to start the week, partially on news that pending tariffs will be more “targeted.” Technology stocks also rallied on the perception of higher-than-expected AI demand. But the market is very headline sensitive. And the headlines are likely to keep on coming.
If I had to bet, I would say the market probably made the bottom for now and is more likely to trend higher. But I don’t have a high degree of confidence right now. A couple of negative headlines could send stocks plunging to new lows. I’m bullish on the market over the rest of the year, but there could be more trouble ahead over the next several weeks.
Recent Activity
March 5
Constellation Energy Corporation (CEG) – Rating change “HOLD” to “BUY”
March 12
Cheniere Energy Partners, L.P. (CQP) – Rating change “BUY” to “HOLD”
FS KKR Capital Corp. (FSK) – Rating change “BUY” to “HOLD”
Main Street Capital Corporation (MAIN) – Rating change “BUY” to “HOLD”
Cheniere Energy, Inc. (LNG) – Rating change “BUY” to “HOLD”
Purchased Waste Management, Inc. (WM) - $223
March 19
Brookfield Infrastructure Partners (BIP) – Rating change “BUY” to “HOLD”
March 26
AbbVie Inc. (ABBV) – Rating change “BUY” to “HOLD”
High Yield Tier
AGNC Investment Corporation (AGNC – yield 14.2%) – This mortgage REIT has taken a step back amid the market correction. But it has still returned 12% YTD. It’s been one of the more stable stocks over the past month. After a rough couple of years with rising inflation and interest rates, this mortgage REIT is having a good year so far. Hopefully, it can keep going. The REIT reported solid earnings this quarter. AGNC has had a bad run over the last couple of years and it’s due for a significant turnaround. We’ll see if it can maintain the momentum and make a run back past the recent high. BUY
Brookfield Infrastructure Partners (BIP – yield 5.7%) – After a rough couple of years of inflation and rising interest rates, BIP has only managed to go sideways since the environment improved. It’s disappointing. The upside of this underperforming stock is that it’s defensive. But it sold down along with everything else in the recent turmoil. BIP better show some chops soon or it will be cut loose. It’s perplexing because the business is sound. Earnings beat expectations with 8% FFO (funds from operations) growth for 2024. Brookfield also announced a 6% distribution increase, marking the 16th consecutive year of payout increases. The business is delivering, but the stock price isn’t. It’s off the lows, but it’s still well below the early 2022 high. The stock has not been behaving as expected and is downgraded to a HOLD unless and until it exhibits better relative performance. (This security generates a K1 form at tax time.) HOLD
Cheniere Energy Partners, L.P. (CQP – yield 5.2%) – The stock pulled back a little in the recent market tumult after it surged to a new high after beating revenue estimates on rising LNG demand. But CQP held up better than any other position in the energy space when that sector sold down. Now, energy is strong again. U.S. exports of LNG are likely to continue to grow strongly and CQP is in a great position. That’s why CQP is still up 20% YTD in a down market. It was reduced to a HOLD a few weeks ago as it pulled off the high and the market got uglier. (This security generates a K1 form at tax time.) HOLD
Enterprise Product Partners (EPD – yield 6.3%) – After a wild ride over the last two months of last year, EPD has moved back to the high point of the recent range and gone sideways in the tough market. It doesn’t seem to do much when other midstream companies rally but it also holds up better in down markets. Enterprise reported solid earnings with 7% earnings growth for the year and a 5% distribution hike, marking the 26th consecutive year of an increase. EPD is still below the all-time high set in 2014 and can certainly move beyond that, especially with much higher earnings now. (This security generates a K1 form at tax time.) BUY
FS KKR Capital Corp. (FSK – yield 13.3%) – This Business Development Company (BDC) seemed like it would crawl slowly higher forever. But the recent specter of less-than-expected economic growth gripped the market and cyclical companies pulled back. FSK has benefited from the increased economic optimism that followed the election as it has a portfolio of small businesses that tend to be economically sensitive. Despite all that, the BDC held tough until this month. But it still hasn’t come down far from the high. Future performance will depend on the economy. HOLD
Main Street Capital Corporation (MAIN – yield 7.2%) – As a BDC, this story is very similar to that of FSK, although the stock hasn’t been quite as resilient. MAIN has returned 38% over the past year but it pulled back sharply in the recent market correction. Main’s portfolio of companies not only makes high-interest loans, but it also takes equity stakes. The equity stakes are the primary reason the total returns have been better than just about every other BDC. If the economy hangs on, the BDC should continue to deliver, but if a slowing economy becomes an increasing problem, the stock price will fall from here. The rating was lowered to HOLD pending economic news. HOLD
ONEOK Inc. (OKE – yield 4.0%) – OKE has had a wild ride for a midstream energy company. It soared after the election with the anticipated growth in electricity demand. But it gave back all those gains and then some between late November and early March. But it has been on a tear recently, up over 15% since March 7th. For all the craziness, OKE is still up 4% YTD and 36% over the past year. ONEOK has reliable revenues and is in an ideal position for strong growth as natural gas production inevitably increases and electricity demand grows. A continued rebound is highly likely as the market stabilizes. BUY
The Williams Companies, Inc. (WMB – yield 3.3%) – This midstream energy company stock is within pennies of the 52-week high despite the recent market. It has held up remarkably well and is still in an uptrend that began in early 2024. WMB was riding high as a natural gas company as electricity demand expectations soared. It took a big hit after the DeepSeek news but has gained all of it back. Energy is one of the only stock sectors with positive returns over the last month, and midstream energy companies have been particularly strong. I still like midstream energy for the rest of this year. BUY
Dividend Growth Tier
Rating change – “BUY” to “HOLD”
AbbVie (ABBV – yield 3.1%) – ABBV had been a stellar defensive performer. It was making new highs while most stocks were falling. But the ascent has stopped. It has been trending lower since the March 11th high. I’m still very bullish on the stock over the course of this year and beyond as the company has finally moved beyond the Humira patent issue as new drugs have replaced peak revenue. The patent issue had been holding the stock back but now it should move higher. However, ABBV has a tendency to pull back after surging to a new high. It looks like the stock may be in the process of doing that now. ABBV will be downgraded to “HOLD” because there is a good chance the pullback goes further. HOLD
Ally Financial Inc. (ALLY – yield 3.2%) – This online banker has been swinging around sort of aimlessly. But it really made a strong move off the recent bottom in the last week and a half. The stock has also managed about an 8% YTD return in a lousy market with declining confidence in the economy. If the economy deteriorates toward a recession or close to it, the stock will sell off. It deals primarily in auto loans, which are highly cyclical. However, if the economy hangs in there or economic news gets better, it could really take off. We’ll see if this current rally still has legs and then reevaluate. BUY
Broadcom Inc. (AVGO – yield 1.2%) – It’s been a tough year so far for technology stocks, especially those that had been riding AI demand to stratospheric highs. AVGO is down more than 23% from the high and over 17% YTD. The good news is that the stock may have bottomed out as it has trended higher since the stellar earnings report earlier this month. Broadcom soundly beat expectations with 25% revenue growth and 45% earnings growth and raised guidance for the current quarter. AI revenue grew 77% over last year’s quarter and reported that it has scored two more large AI chip customers. AVGO is being dragged lower by the sector. But it should come roaring back because it was higher for good reason, skyrocketing revenues. BUY
Cheniere Energy, Inc. (LNG – yield 0.9%) Earnings – Cheniere has been all over the place this year. It’s still up 9% YTD and it made a nice move higher over the last week, but it’s still more than 10% below the high in January. Cheniere is the best liquid natural gas (LNG) export company stock at a time of rising LNG demand worldwide. The company delivered a great fourth quarter, beating both revenue and earnings estimates. It also posted record LNG production and is in the process of expanding capacity. The stock will bounce around with the market in the near term. But the strong story is still very much intact with a friendlier regulatory environment and rising demand. HOLD
Constellation Energy Corporation (CEG – yield 0.7%) – The news is better lately as CEG has been climbing slowly higher over the last two weeks and may have bottomed out after a huge selloff. CEG was climbing into the stratosphere earlier this year as AI and the electricity trade were on fire. But the DeepSeek news killed that trade for now. And the downside is getting as overdone as the upside was. The truth of the stock should be somewhere between the January high and the current low.
The fear is that AI will require less data than previously thought, data center plans will be stalled and the anticipated growth in electricity won’t occur. Nonsense, electricity demand is sure to grow even if at a lower rate than previously anticipated. And the fears are likely overblown. The two huge recent deals (the Microsoft (MSFT) deal and the Calpine acquisition) will deliver a high level of earnings growth in the years ahead and there may be more new deals coming. The market will regain its footing at some point and CEG can come back fast. BUY
Digital Realty Trust, Inc. (DLR – yield 3.1%) – This data center REIT has been a great investment since it was added to the portfolio. But it has certainly been floundering of late. DLR moved sharply lower between late November and early March but has come off the recent bottom over the last couple of weeks. The weakness may be over, and I’m looking for DLR to generate lasting upside traction from here. The stock probably got a little too high too fast. But the future still looks extremely bright. Data center growth will continue to be a trend this year as the recent troubles probably fade into memory. HOLD
Eli Lilly and Company (LLY – yield 0.7%) – The superstar drug company stock got an unexpected drubbing earlier this month, falling 11%. LLY had been soaring while the market got clobbered until a news event earlier this month. A pipeline weight-loss drug for Novo Nordisk (NVO) reported disappointing results in a trial. Lilly is a big player in the red-hot weight-loss drug sector with its highly popular Zepbound. The weight-loss drug players sold off in sympathy with the Novo news as worry spread that these drugs might not be as good as previously thought. But Novo is a competitor. And Zepbound is killing it. When a type of drug gets this hot, markets tend to overreact, especially in such an unforgiving market. I don’t think this news changes anything. And now, LLY is cheaper. BUY
McKesson Corporation (MCK – yield 0.4%) – Quietly, while nobody is looking, this supply chain pharmaceutical distributor has had an epic rise and made a new all-time high. It’s up 40% since late September. The stock had been knocked down last summer and fall after the company reported supply chain issues with weight-loss drugs. But those problems are behind the company. MCK has resumed its old habit of slowly going higher and higher as it deals in a market that grows all by itself because of the aging population. MCK had been in an uptrend since the middle of December and has spiked higher while the rest of the market languished. BUY
Qualcomm Inc. (QCOM – yield 2.1%) – The mobile device chip company delivered earnings with strong quarterly results and raised guidance for 2025. Revenue rose 17% for the quarter and EPS rose 24%. Both easily exceeded expectations. There was solid growth in just about every segment, including iPhone demand. And guidance was raised for this year. But there wasn’t evidence of a strong AI smartphone upgrade cycle. And that’s really what the market is looking for. Several analysts expect an upgrade cycle to ignite sometime this year. And that could really move the stock higher. But a breakout is unlikely until that event is within sight. In the meantime, the performance has been okay. QCOM is up 5% YTD while the overall technology sector is down 8%. BUY
Toll Brothers, Inc. (TOL – yield 0.9%) – TOL is a cyclical company that doesn’t respond well to a slower economy. But that recent weakness is somewhat tempered by the falling mortgage rates, which make housing more affordable. The slower growth narrative hit TOL when it was already down, and the stock hit a 52-week low. But TOL has been rising for the past couple of weeks. It could be that the economic worries don’t have lasting traction. Narratives change often in the market. The longer-term supply/demand dynamic is hugely favorable to this company, and it will rebound eventually. We will hold onto the stock for now in hopes that the current rally in the stock continues. HOLD
UnitedHealth Group Inc. (UNH – yield 1.6%) – UNH took another hit last month when the market wasn’t thrilled with the earnings report and the FTC accused the company, along with others, of overcharging for life-saving drugs. Earnings were mixed as revenue missed and earnings beat. However, the company also reiterated 2025 guidance. It’s been one thing after another with this one. The strong track record of outperformance leads me to believe this stock can make a move at some point. But the bad news keeps coming. It was downgraded to a HOLD until UNH shows evidence of bottoming out. It has moved off the bottom and is one of the few stocks in the black on Tuesday, which shows some defensive chops. HOLD
Waste Management, Inc. (WM – yield 1.5%) – It’s so far so good for this newest portfolio addition. It’s coming as advertised. WM held up well when the market corrected. It’s pulling back a little as the market recovers. But it’s already showing some strong defensive chops. You can depend on garbage. As the market plunges and uncertainty swirls, investors are attracted to safety, and the relative performance of stocks like WM tends to thrive. Of course, this stock also has a good track record in bull markets. It’s a good holding if the market turns around too. BUY
Safe Income Tier
NextEra Energy (NEE – yield 3.2%) – The regulated and clean energy utility stock has done okay in a tough market. It was up for this month and YTD before pulling back over the past couple weeks. It seems like every time the market gets crushed, NEE has a great day. Investors are attracted to its defensive characteristics as a slower economy is feared and uncertainty about tariffs keeps any optimism at bay. But NEE has historically outperformed other defensive stocks significantly. It just got walloped by inflation and rising rates. But rates are falling, and NextEra is poised for even stronger growth ahead as electricity demand rises. BUY
USB Depository Shares (USB-PS – yield 5.7%) – Markets like this are a good time to be in fixed income. Longer-term interest rates are falling and that should have the effect of increasing the price. The ten-year fell from 4.8% to around 4.3% and fixed income is rallying. This preferred stock has endured a tough bond market and should thrive in a good one. BUY
Vanguard Long-Term Corp. Bd. Index Fund (VCLT – yield 5.0%) – Ditto for VCLT. The long-term corporate bond ETF loves falling interest rates and hates rising ones. There will be more price pressure if rates continue to rise and vice versa. But the situation over the course of the year should be good. BUY
High Yield Tier | ||||||||||
| Security (Symbol) | Date Added | Price Added | Div Freq. | Indicated Annual Dividend | Yield On Cost | Price on close 3/25/25 | Total Return | Current Yield | CDI Opinion | Pos. Size |
| AGNC Investment Corp. (AGNC) | 14.20% | 10 | 7% | 14.00% | BUY | |||||
| Brookfield Infrastructure Ptnrs. (BIP) | 6.80% | 30 | 51% | 5.70% | HOLD | |||||
| Cheniere Energy Partners, L.P. (CQP) | 6.70% | 62 | 22% | 5.20% | HOLD | |||||
| Enterprise Product Partners (EPD) | 7.60% | 34 | 87% | 6.30% | BUY | |||||
| FS KKR Capital Corporation (FSK) | 14.40% | 21 | 24% | 13.30% | HOLD | |||||
| Main Street Capital Corp. (MAIN) | 9.00% | 59 | 38% | 7.20% | HOLD | |||||
| ONEOK Inc. (OKE) | 7.50% | 102 | 140% | 4.00% | BUY | |||||
| The Williams Companies, Inc. (WMB) | 8/10/22 | 33 | Qtr. | 1.9 | 5.80% | 61 | 112% | 3.30% | BUY | 1 |
| Current High Yield Tier Totals: | 9.00% | 60% | 7.40% | |||||||
Dividend Growth Tier | ||||||||||
| AbbVie (ABBV) | 209 | 254% | 3.10% | HOLD | ||||||
| Ally Financial Inc. (ALLY) | 38 | -1% | 3.20% | BUY | ||||||
| Broadcom Inc. (AVGO) | 191 | 367% | 1.20% | BUY | ||||||
| Cheniere Energy, Inc. (LNG) | 7/10/24 | 175 | Qtr. | 2 | 1.10% | 234 | 34% | 0.90% | HOLD | 1 |
| Constellation Energy Corp. (CEG) | 8/14/24 | 186 | Qtr. | 1.41 | 1.00% | 229 | 23% | 0.70% | BUY | 1 |
| Digital Realty Trust, Inc. (DLR) | 155 | 40% | 3.10% | HOLD | ||||||
| Eli Lilly and Company (LLY) | 865 | 500% | 0.70% | BUY | ||||||
| McKesson Corporation (MCK) | 661 | 46% | 0.40% | BUY | ||||||
| Qualcomm (QCOM) | 160 | 114% | 2.10% | BUY | ||||||
| Toll Brothers, Inc. (TOL) | 110 | -27% | 0.90% | HOLD | ||||||
| UnitedHealth Group Inc. (UNH) | 516 | 2% | 1.60% | HOLD | ||||||
| BUY | 1 | |||||||||
| Current Dividend Growth Tier Totals: | 2.90% | 113% | 1.60% | |||||||
Safe Income Tier | ||||||||||
| 70 | 85% | 3.20% | BUY | |||||||
| U.S. Bancorp Depository Shares (USB-PS) | 10/12/22 | 19 | Qtr. | 1.13 | 6.10% | 20 | 19% | 5.70% | BUY | 1 |
| 4.50% | 76 | 4% | 5.00% | BUY | ||||||
| 5.10% | 36% | 4.60% | ||||||||
Copyright © 2025. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.
