June 25, 2025

Stocks Just Want to Go Higher

Stocks have been impressively resilient. The market handled the Iran news like a trooper. Stocks have rallied since the U.S. bombing.

It seems like the default position of investors is optimism. Stocks seem to want to go higher and only go lower when they defy gravity. The market made up the tariff panic in short order. Rates have remained stubbornly high. The news from the Middle East is wild. Yet stocks are within bad-breath distance of the all-time high.

The market has proven a lot of naysayers wrong. But prices are high, and uncertainty abounds. Tariffs won’t be a disaster, but there will be more headlines, and we’re not out of the woods yet. The economy is okay, but it’s not great. The Middle East looks okay for now, but who knows?

I believe these issues will turn out okay and the market will be higher than it is now by the end of the year. But it’s hard to see how stocks generate lasting upside traction until there is more clarity on the current issues. And that could take many months.

I still believe the market will bounce around in a sideways fashion for the duration of the summer. But the market’s ability to blow off the Iran turmoil makes me less confident that the market won’t move higher through the summer.

A “risk on” mood has taken over since investors decided Iran won’t be a big deal. Recent high-flyers, including Broadcom (AVGO), Constellation Energy (CEG), and Oracle (ORCL), are moving higher again. The cyclical stocks look strong, as do the natural gas export companies Cheniere Energy (LNG) and Cheniere Energy Partners (CQP). Hopefully, this recent trend has legs.

But things can change on a dime in this environment. There could be a headline any day that changes everything. Stay tuned.

Recent Activity

May 28

NextEra Energy (NEE) – Rating change “BUY” to “HOLD”

June 11

Broadcom Inc. (AVGO) – Rating change “BUY” to “HOLD”

High Yield Tier

AGNC Investment Corporation (AGNC – yield 15.6%) – The mortgage REIT has moved well above the low of early April. That’s the most that can be said for it right now. AGNC has benefited from the better economic news and a more risk-friendly environment. Even though the strong jobs reports make the Fed less likely to cut rates soon, it is still likely that the Fed will lower the fed funds rate this year, which will reduce funding costs. It will also help with the net asset value (NAV), which tends to determine the share price direction. However, there is still a lot of uncertainty out there between the tariffs, economy, and Middle East turmoil. Meanwhile, AGNC pays a huge yield while you wait. HOLD

Brookfield Infrastructure Partners (BIP – yield 5.3%) – BIP has made a solid move up from the recent bottom since early April. The price achieved the highest level YTD and is within about 3 per share of the 52-week high. BIP is finally getting some traction after two lousy years amid inflation and rising interest rates. It’s an impressive move considering interest rates are remaining stubbornly high, which is bad for an MLP because it increases borrowing costs and narrows profits. But the business is sound. It’s entirely possible that BIP can make a run well beyond the 52-week high, especially if interest rates trend lower from here. (This security generates a K1 form at tax time.) HOLD

Cheniere Energy Partners, L.P. (CQP – yield 5.8%) – This NGL export partnership had been a stellar performer until the April swoon in the market. It hasn’t bounced back to prior levels. However, natural gas demand remains strong, and exports from Cheniere are rising. It has pledged to double NGL production, and new facilities are coming online that should boost the bottom line this year. CQP is being held back by tariff and economic fears right now. But that situation should improve over time, and the stock pays you well to wait. Meanwhile, CQP could get a boost if the Iran conflict drags on or gets worse and energy prices move higher as a result. (This security generates a K1 form at tax time.) HOLD

Enterprise Product Partners (EPD – yield 6.9%) – The midstream energy partnership is a great position to have right now. The price has been trending higher since early April, but it still hasn’t gotten back to March levels, so it’s cheap. The payout is huge and very safe and provides a great buffer during flat and down markets. And the revenues will continue to thrive during just about any environment. The midstream partnership also has two major projects coming online this year that represent $6 billion in investment and should grow the top and bottom lines. (This security generates a K1 form at tax time.) BUY

FS KKR Capital Corp. (FSK – yield 13.8%) – Prospects for this Business Development Company (BDC) are uncertain. FSK had been held back by fears about a slowing economy and possible recession. The BDC has a portfolio of small businesses, which tend to be cyclical. But the recent good jobs report is feeding a perception that the economy will be okay. The return is about even YTD in a year that has not been a good one so far for most cyclical stocks. Meanwhile, it pays that massive yield that should be secure. If the economy holds up, FSK should do well. HOLD

Main Street Capital Corporation (MAIN – yield 7.4%) – The story for this BDC is like FSK. MAIN has been trending higher since early April and got a boost when the economic prognosis improved. The investment outlook has been cautious because of rising expenses and tariff concerns, as with most other companies. But if the economic optimism is confirmed going forward, the stock could have a nice move higher. MAIN has delivered a solid return since being added to the portfolio last year. The fortunes of this portfolio position will depend on the economic news going forward. And it pays a high yield with monthly dividends while you wait around. HOLD

ONEOK Inc. (OKE – yield 5.2%) – This midstream energy company’s stock performance has been disappointing. OKE is down over 18% YTD while the overall energy sector is even over the same period. OKE recently took a hit when it missed on earnings in an unforgiving environment. But earnings were generally solid, and ONEOK reaffirmed guidance for 2025 and 2026, which includes an earnings growth jump to 15% as new assets come online, including two sizable recent acquisitions. The story is still quite strong, but there has been some recent share dilution that somewhat mutes the earnings growth. This stock should pick up, but I’ll watch it closely. HOLD

The Williams Companies, Inc. (WMB – yield 3.3%) – WMB has been by far the best performing midstream energy company in the portfolio this year with a 14% YTD return. Natural gas demand is highly resilient and even remained so during the pandemic. Williams also has solid growth ahead with its increasing exposure to the NGL export market. The price is within just one dollar of the 52-week high. Williams delivered another solid earnings report and raised guidance for 2025 as project expansions come online. WMB will likely continue to march back toward the high and beyond unless the market rolls over again. But regardless, it should be a solid holding over the rest of the year. BUY

Dividend Growth Tier

AbbVie (ABBV – yield 3.6%) – ABBV continues to hang in there. It took a hit along with the rest of the market in early April. Then the quick recovery got interrupted by pending tariff and pricing issues in May. Healthcare is still vulnerable to tariff news, and stocks have been stuck. The executive order tying U.S. drug prices to international prices landed without much damage to the stocks. But there is also the issue of pharmaceuticals being targeted for tariffs floating around after the administration said it is coming. The issue could have a negative impact on drug companies, and they are unlikely to move meaningfully higher until there is more clarity. AbbVie itself is doing well as the Humira expiration pain is behind it and earnings are growing again. HOLD

Ally Financial Inc. (ALLY – yield 3.3%) – It’s really about the economy with this online banker. ALLY made a nice move over the past couple of months with the better economic news. It’s up 6% YTD and 27% since the April low. But ALLY is still stuck in the upper range of where it has been bouncing around since the end of last summer. Rates are still high, and there is still a high degree of uncertainty regarding the direction of the economy over the rest of the year, but the prognosis is improving. As long as the economy stays solid and the worst of the tariff uncertainty stays behind us, ALLY should be strong and eventually make up for some lost time. HOLD

Broadcom Inc. (AVGO – yield 0.9%) – The custom AI chipmaker has leveled off after the earnings report earlier this month. AVGO made a huge 80% gain from the low of April. The company did what was expected in the earnings report but didn’t issue unexpected and exciting news, like a 10-for-1 stock split or the estimates of $60 to $90 billion in AI revenue in a few years. It looks like a “sell the news” situation. But the price didn’t pull back with any significance and has started moving higher again. Broadcom recently received an analyst upgrade from HSBC on anticipated higher-than-currently-expected AI revenue. AVGO just hit a new high and may have further to go. HOLD

Cheniere Energy, Inc. (LNG – yield 0.9%) – The country’s largest exporter of natural gas reported earnings that exceeded expectations and reiterated previous guidance for 2025. Commercial activity among LNG exporters has gained momentum after the administration lifted a moratorium on export permits. Cheniere plans to double exports by building more facilities. Several of those projects were recently completed and should begin to add to the bottom line. LNG has been going sideways for the last two months. Hopefully, it can break out soon. HOLD

Constellation Energy Corporation (CEG – yield 0.5%) – Constellation announced another big energy deal earlier this month. The company struck a 20-year deal to provide nuclear power to Meta (META) to power its AI-capable data centers from its nuclear plant in Clinton, IL. Financial details are not yet available. It is the latest in tech companies purchasing carbon-free nuclear power to provide for huge growth in electricity demand from data centers. Constellation indicated that such a deal, and maybe more, was imminent in the last earnings report. CEG leveled off for a while after the surge but has been moving higher again over the last several days. HOLD

Digital Realty Trust, Inc. (DLR – yield 2.8%) – This data center REIT is back. DLR had trended lower for more than four months but has soared over 30% since early April. Despite the recent spike, DLR is still only up 2% for the year and 10% below the high. Yet it has returned 61% since being added to the portfolio less than two years ago. It trades more with technology than other REITs because it specializes in data centers. Digital also raised its funds from operations (FFOs) guidance for this year because of strong data center demand. Hopefully, this uptrend can take DLR up toward the high. HOLD

Eli Lilly and Company (LLY – yield 0.7%) – LLY is a juggernaut that’s lost its mojo over the past year. It’s down 20% from the 52-week high and is down over11% over the past year. But even after the lackluster year, LLY has still returned more than 400% over the last five years. It’s a hot stock that has cooled off lately. That’s a big slowdown. Drugs are likely soon to be targeted for tariffs, and inputs for Lilly’s weight-loss drugs come from Ireland. However, the administration indicated that time would be given to relocate facilities to the U.S., and Lilly has already begun that process. Tariffs are unlikely to sting Lilly that much.

Lilly is still knocking the cover off the ball with huge demand for its weight-loss and other drugs. There is also likely approval for an oral weight-loss drug later this year. But until there is more clarity on these issues, LLY is unlikely to generate lasting upside traction. That’s why it is rated “HOLD” for now. But LLY should soar on the other side of this uncertainty and make up for lost time. HOLD

McKesson Corporation (MCK – yield 0.4%) – The supply chain pharmaceutical company has leveled off a bit over the past month. But the uptrend has just slowed. MCK is still up 26% YTD and not far from the 52-week high. MCK was downgraded to a HOLD rating as the healthcare sector is under pressure and will continue to be so in the weeks ahead as pricing and tariff issues are front and center. But this is another impressive quarter for a stock that has been red hot and likely won’t be very negatively affected by the issues. However, if the healthcare sector suffers, it will likely affect MCK in the near term. HOLD

Oracle Corporation (ORCL – yield 0.9%) – ORCL has levelled off after a huge week when it gained 23%. The technology stalwart reported earnings that beat expectations. But the main event was that management reiterated enormous growth with data centers and AI. OCI revenue grew 49% last year. While that’s impressive, management has said growth should eclipse 70% this year. There isn’t nearly enough current data center capacity to meet demand. Management intends to double data center capacity this fiscal year and triple it by the end of next fiscal year. Investors were reminded and reassured that Oracle has a huge growth catalyst ahead. The stock leveled off for a couple of weeks but has been moving back near the high. BUY

Qualcomm Inc. (QCOM – yield 2.3%) – The chipmaker got a boost after reporting a deal to buy Alphawave IP Group for $2.4 billion to move faster into the artificial intelligence data center market. Qualcomm is making a big push to get its central processing unit chips used in the fast-growing data center market. The deal is expected to close in the first quarter of 2026. The market liked that deal as the stock jumped about 4% on the day of the announcement. The company is broadening its offerings across a wider spectrum, which is good for the future. But the market wants to see rising smartphone demand for the stock to take off. That isn’t happening yet. HOLD

Toll Brothers, Inc. (TOL – yield 0.9%) – This beleaguered homebuilder company stock has moved up from the April low. TOL showed some signs of life amid the better economic news recently. But mortgage rates are still stubbornly high, and that kills home affordability and sales. That said, the longer-term dynamics are hugely favorable for Toll Brothers. The demand for housing greatly exceeds supply, and there is a lot of pent-up demand when mortgage rates come down. If the economy proves to be strong for the rest of the year, TOL should be okay, and if rates come down, the stock could soar. TOL has been moving higher and hit the highest price since February. HOLD

Waste Management, Inc. (WM – yield 1.4%) – The garbage king is delivering as advertised so far. It faced a huge defensive test shortly after being added to the portfolio, and it passed. WM did fall sharply but then gained back all the losses. The stock was later under some pressure while many other stocks soared amid the improved tariff news and the “risk on” mood. But WM regained its footing and recently made a new high before pulling back somewhat in June. WM took a back seat as cyclical stocks rallied after the more positive economic news. WM should continue to be solid in just about any kind of market. BUY

Safe Income Tier

NextEra Energy (NEE – yield 3.1%) – The regulated and clean energy utility stock has been trending higher since April, albeit in a bouncy fashion. But NEE is still 20% below the 52-week high and even further from the all-time high. The stock initially pulled back on the spike in interest rates. Then, the clean energy industry took a hit as the new bill in Congress passed the House and promises to end subsidies for clean energy. The huge subsidies had given support to much of the industry. It’s certainly negative for NextEra, which was a big beneficiary. The company can stand on its own and has before. It should endure this storm in decent shape. In fact, NEE has already made up all the losses. But the news cycle on this may have more legs, and the rating will be reduced to HOLD until the damage seems complete and NEE shows signs of generating lasting upward momentum. HOLD

USB Depository Shares (USB-PS – yield 6.1%) – The recent turbulence should have been a good time for fixed income. But interest rates spiked along with the stock market volatility. As a result, this preferred stock plunged to a new 52-week low. The combination of economic uncertainty and rising interest rates took the stock down. However, it should regain traction as the market has stabilized, and rates are likely to trend lower eventually. BUY

Vanguard Long-Term Corp. Bd. Index Fund (VCLT – yield 5.3%) – 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 more positive than it has been. BUY

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