Here Come the Tariffs
It started off as an ugly week for the market. But things have gotten better. Stocks flirted with the recent low on Monday but held strong and recovered. That’s a good sign. But is it enough?
Big tariff news is on the doorstep. Uncertainty abounds. It is unclear yet how many countries will be included in the reciprocal tariffs scheduled to take effect today and to what extent there will be exceptions. The market may be happier about things by the end of the week. But if it isn’t, stocks might go lower again.
There could be exceptions made. Certain countries could agree to lower their tariffs and stave off reciprocal tariffs. Deadlines could be extended. No one knows. We’ll have to wait and see. The market seems to want to hold the recent bottom. But the dam could break with bad tariff news. Even if the market doesn’t go below the March 13 low, it is unlikely that stocks will muster lasting upside traction until there is more clarity on the issue.
Meanwhile, the market isn’t doing as badly as it may seem. Most of the 11 S&P 500 stock sectors are higher year-to-date. Energy is up more than 9% and health care is up over 6% for the year. The S&P 500 is being dragged down mostly by technology, which accounts for about a third of the index. Until the technology sector regains its footing, the market index is unlikely to significantly recover.
But technology will be back. It was overdue for a correction, especially the artificial intelligence beneficiaries. AI isn’t going away. It will continue to be a huge growth catalyst for years to come. Technology will come roaring back at some point.
It’s hard to say how the tariff news and the market will go in the weeks ahead. If the market perceives the tariffs as really bad news then we are probably in for another round of selling. But if the news is good or even not-that-bad, which is more likely, we will probably bounce around for a while longer. Stay tuned.
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”
April 2
AGNC Investment Corporation (AGNC) – Rating change “BUY” to “HOLD”
High Yield Tier
Rating change – “BUY” to “HOLD”
AGNC Investment Corporation (AGNC – yield 15.0%) – The mortgage REIT had a strong move off the bottom but has been floundering again in this market. AGNC has mostly bounced around in the lower range for the last couple of years. It has had trouble mustering significant and sustainable upside traction. 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. The turnaround should come eventually and probably before the end of the year. However, the stock tends to ride an upside or downside trend for several weeks and further downside is probably more likely in the near term. HOLD
Brookfield Infrastructure Partners (BIP – yield 5.8%) – 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 miles below the early 2022 high. The stock has not been behaving as expected and has been 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 4.9%) – I didn’t think this LNG exporter partnership would be so resilient. It soared higher in the first two months of the year but hasn’t given up anything in this ugly market. It’s up 26% YTD. Energy has been one of the lone bright spots in the market. But CQP has performed exceptionally well even for an energy stock. U.S. exports of LNG are likely to continue to grow strongly and CQP is in a great position. It was reduced to HOLD because the stock was finally showing some weakness. But it might prove me wrong. (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 13.4%) – 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. The BDC did pull back in March, but it has moved off the bottom even in the tumult of the last several trading days. Future performance will depend on the economy. HOLD
Main Street Capital Corporation (MAIN – yield 7.4%) – As a BDC, this story is very similar to that of FSK, although the stock hasn’t been quite as resilient. MAIN pulled back sharply in late February and early March but has been trending higher lately. 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 4.2%) – Energy has been one of the few bright spots in the recent market, and this more volatile natural gas midstream company has come roaring back. It’s been a bit of a rollercoaster. OKE was rising fast but then got crushed as the natural gas trade unwound after the DeepSeek news. But the selling was hasty. ONEOK has reliable revenues and is in an ideal position for strong growth as natural gas production inevitably increases and electricity demand grows. Investors realized this and OKE spiked about 15% in just a couple weeks. A continued rebound is likely if the market stabilizes. BUY
The Williams Companies, Inc. (WMB – yield 3.3%) – This midstream energy company stock made a new 52-week high last week despite the recent market. Although it has pulled back a little over the last few days, WMB 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 when the electricity trade was hot. 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
AbbVie (ABBV – yield 3.1%) – ABBV pulled back about 10% from the high last month. The stock had been strong in a tough market but has a history of pulling back after a surge to new highs. ABBV was downgraded to a HOLD last week as the market was still highly uncertain and the stock was showing signs of weakness. But it has regained half of the recent pullback in an awful market.
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 and now it should move higher. I’m not sure if the stock will buck the trend and move higher or resume the pullback. But I hesitate to give anything the benefit of the doubt in the current market. HOLD
Ally Financial Inc. (ALLY – yield 3.3%) – This online banker has been swinging around sort of aimlessly. But it really made a strong move off the recent bottom since the middle of March. The stock has also managed about a 4% 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 the recent strength in the stock still has legs and then reevaluate. BUY
Broadcom Inc. (AVGO – yield 1.4%) – 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 35% from the high and over 30% YTD. The stock had been trending higher since a positive earnings report last month, but the selling has reignited in the last few tumultuous days. 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 over 7% 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 liquid (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 0.8%) – CEG had been climbing nicely off the recent bottom for a couple of weeks. But it got kicked in the teeth again over the last couple of days. It’s an unforgiving market right now that continues to punish previously red-hot performers. But the selling is likely being overdone like the buying was.
The fear is that AI will require less data than previously thought and 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 3.4%) – Technology is selling off and DLR is taking a beating. It soared while other REITs floundered when technology was high. Now, it’s paying the price. This data center REIT has been a good investment since it was added to the portfolio. DLR moved sharply lower since late November. The weakness should end when the technology sector recovers. DLR probably got a little too high too fast. But the future still looks extremely bright. Data center growth will continue to be a strong trend 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 last month. LLY had been soaring while the market got clobbered until a news event in March. 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. Lilly is also in a late-stage trial for a weight-loss drug that can be taken orally, which could be a game-changer. 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 over 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 2.2%) – 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. Meanwhile, QCOM has been knocked down with the rest of the tech sector. 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 makes 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 continues. HOLD
UnitedHealth Group Inc. (UNH – yield 1.6%) – UNH took a hit last year when the FTC accused the company, along with others, of overcharging for life-saving drugs. Earnings were mixed but 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. UNH has also been resilient in this tough market as it has rallied 14% since late February. 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 in recent days, which shows some defensive chops. HOLD
Waste Management, Inc. (WM – yield 1.4%) – The garbage king is delivering as advertised so far. It is showing strong defensive chops as it has risen sharply over the past week while most of the market struggled. 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 clean energy utility stock has done OK in a tough market. It was up in March 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 5.9%) – 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 10-year fell from 4.8% to around 4.2% 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 3/31/25 | Total Return | Current Yield | CDI Opinion | Pos. Size |
| AGNC Investment Corp. (AGNC) | 14.20% | 10 | 2% | 15.00% | HOLD | |||||
| Brookfield Infrastructure Ptnrs. (BIP) | 6.80% | 30 | 50% | 5.80% | HOLD | |||||
| Cheniere Energy Partners, L.P. (CQP) | 6.70% | 66 | 29% | 4.90% | HOLD | |||||
| Enterprise Product Partners (EPD) | 7.60% | 34 | 90% | 6.30% | BUY | |||||
| FS KKR Capital Corporation (FSK) | 14.40% | 21 | 24% | 13.40% | HOLD | |||||
| Main Street Capital Corp. (MAIN) | 9.00% | 57 | 33% | 7.40% | HOLD | |||||
| ONEOK Inc. (OKE) | 7.50% | 99 | 133% | 4.10% | BUY | |||||
| The Williams Companies, Inc. (WMB) | 8/10/22 | 33 | Qtr. | 1.9 | 5.80% | 60 | 107% | 3.30% | BUY | 1 |
| Current High Yield Tier Totals: | 9.00% | 59% | 7.40% | |||||||
Dividend Growth Tier | ||||||||||
| AbbVie (ABBV) | 210 | 254% | 3.10% | HOLD | ||||||
| Ally Financial Inc. (ALLY) | 36 | -4% | 3.30% | BUY | ||||||
| Broadcom Inc. (AVGO) | 167 | 309% | 1.40% | BUY | ||||||
| Cheniere Energy, Inc. (LNG) | 7/10/24 | 175 | Qtr. | 2 | 1.10% | 231 | 33% | 0.90% | HOLD | 1 |
| Constellation Energy Corp. (CEG) | 8/14/24 | 186 | Qtr. | 1.41 | 1.00% | 202 | 9% | 0.80% | BUY | 1 |
| Digital Realty Trust, Inc. (DLR) | 143 | 29% | 3.40% | HOLD | ||||||
| Eli Lilly and Company (LLY) | 826 | 473% | 0.70% | BUY | ||||||
| McKesson Corporation (MCK) | 673 | 48% | 0.40% | BUY | ||||||
| Qualcomm (QCOM) | 154 | 105% | 2.20% | BUY | ||||||
| Toll Brothers, Inc. (TOL) | 106 | -30% | 0.90% | HOLD | ||||||
| UnitedHealth Group Inc. (UNH) | 524 | 4% | 1.60% | HOLD | ||||||
| BUY | 1 | |||||||||
| Current Dividend Growth Tier Totals: | 2.90% | 103% | 1.70% | |||||||
Safe Income Tier | ||||||||||
| 71 | 87% | 3.20% | BUY | |||||||
| U.S. Bancorp Depository Shares (USB-PS) | 10/12/22 | 19 | Qtr. | 1.13 | 6.10% | 19 | 17% | 5.90% | BUY | 1 |
| 4.50% | 76 | 5% | 5.00% | BUY | ||||||
| 5.10% | 36% | 4.60% | ||||||||
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