May 28, 2025

The Rally Reignites

The market is looking good. Sure, it pulled back last week. But not by much. After the huge spike it had, the lack of a more significant pullback is encouraging. Stocks also started this week with a big up day on Tuesday.

The big catalyst to start the week is the announcement by the Trump administration of a delay in implementing a 50% tariff on the European Union. The tariffs were scheduled to take effect on June 1 and have been pushed back until July 9 while negotiations are taking place. Hopefully, a deal can be made in the next few weeks.

Meanwhile, there is another positive development. Consumer confidence numbers soared in May by the most on a month-to-month basis since 2009. The index had declined for the past four months straight. The big spike this month reflects the belief by consumers and investors alike that tariffs will not culminate in a disaster.

The economic news is important. As the fear of soaring inflation and a ruined economy from the tariffs fades, investors will look to the economy. A faltering economy could add more trouble for stocks beyond the tariffs. The past consumer numbers, as well as the negative GDP last quarter, increased the fear of a slower economy and possible recession. The recent consumer confidence and the recent jobs numbers indicate the economy might be stronger than expected.

Meanwhile, the rally in technology is continuing this week after a brief pullback last week. It looks like that sector will continue to run higher after the recent correction.

Recent Activity

May 7
Eli Lilly and Company (LLY) – Rating change “BUY” to “HOLD”
AbbVie Inc. (ABBV) – Rating change “BUY” to “HOLD”

May 14
Purchased Oracle Corporation (ORCL) - $162.95
McKesson Corporation (MCK) – Rating change “BUY” to “HOLD”
SOLD UnitedHealth Group, Inc. (UNH) – $308.01

May 28
NextEra Energy (NEE) – Rating change “BUY” to “HOLD”

High Yield Tier

AGNC Investment Corporation (AGNC – yield 16.3%) – The mortgage REIT reported earnings that beat consensus estimates. The stock price has moved higher since the report. The REIT reported wider spreads as the 10-year Treasury rate has moved higher again, and the Fed is likely to cut the Fed Funds rate several times this year, perhaps beginning in June. Lower short-term rates would reduce borrowing costs and increase spreads, all else being equal. The stock posted a total return 7.8% in the first quarter. AGNC can’t stand up to a market like we’ve had recently with indiscriminate selling. But the stock has a long history of market-outperforming years and is due for one after the last two. HOLD

Brookfield Infrastructure Partners (BIP – yield 5.3%) – BIP has made a solid move up from the recent bottom over the past month. The stock is now near the highest level from earlier this year. BIP should have been set up for strong relative performance in the recent market volatility. The problem is that interest rates spiked higher at the same time, which is bad for an MLP because it increases borrowing costs and narrows profits. But it has generated traction of late and is now up over 5% YTD. And the business is sound. It’s entirely possible that BIP can make a run toward the 52-week high and beyond. (This security generates a K1 form at tax time.) HOLD

Cheniere Energy Partners, L.P. (CQP – yield 5.6%) – This NGL export partnership reported Q1 results that exceeded expectations on revenue and earnings and reiterated previous guidance for 2025. CQP held up relatively well in the recent market tumult and is up over 12% YTD, although the price has dipped recently. Competition is coming as Venture Global received approval to build capacity that will make it the biggest LNG exporter. But that will take a while. Meanwhile, Cheniere is king. Global natural gas demand remains strong and growing, regulations are coming down and gas production is being ramped up. It should be in a strong position for the rest of the year after surviving this market in fine shape. (This security generates a K1 form at tax time.) HOLD

Enterprise Product Partners (EPD – yield 6.8%) – The midstream energy partnership is doing OK after two stellar years. It’s up about 4% YTD. EPD is still down from the beginning of April and has not regained those losses yet, unlike the overall market. But EPD was near the 52-week high before the trouble started. Enterprise has two major projects coming online this year, representing $6 billion in investment, that should grow the top and bottom lines. The distribution coverage is still a stellar 1.7 times and Enterprise continues to retain earnings for future growth. (This security generates a K1 form at tax time.) BUY

FS KKR Capital Corp. (FSK – yield 13.4%) – This Business Development Company (BDC) got a boost from the better market and improving economic outlook. But it’s still well off the February high. FSK held up OK in the market turbulence. It also reported solid earnings with decent dividend coverage and a large amount of cash on hand. It’s very economically sensitive and it will be sold if the economy shows signs of turning south. But if the economy hangs in there it should continue to deliver going forward. HOLD

Main Street Capital Corporation (MAIN – yield 7.7%) – The BDC reported basically solid earnings with higher net asset value (NAV) and higher distributable income. Although earnings slightly exceeded expectations, they were slightly lower than last year because of rising costs. The investment outlook is cautious because of rising expenses and tariff concerns, like most other companies. MAIN has delivered a solid return of 32% since being added to the portfolio in March of last year, which is more than double the S&P return over the same period. The maintenance of this portfolio position will depend on the economic news going forward. HOLD

ONEOK Inc. (OKE – yield 5.1%) – This midstream energy company stock performance has been disappointing. OKE is down over 17% YTD while the overall energy sector is only down 5% 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 soon, but I’ll watch it closely. HOLD

The Williams Companies, Inc. (WMB – yield 3.4%) – This solid midstream energy company stock has not had a spike in May, but it endured the tough market better than its peers. WMB has about a 12% YTD return after a phenomenal 2024 when it returned 59% for the year. Williams delivered another solid earnings report with earnings per share up 8% and cash flow from operations going up 16% over last year’s quarter. The company also 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. Regardless, it should be a solid holding for the rest of the year. BUY

Dividend Growth Tier

AbbVie (ABBV – yield 3.6%) – The tariff issue is still looming from drug makers. AbbVie has significant manufacturing for blockbuster drugs Rivoq and Humira overseas. It’s still unclear what the final tariff arrangement will be as negotiations continue. But as long as the risk is looming, ABBV is unlikely to generate lasting upside traction. The company itself is doing great as the Humira expiration pain is behind it and earnings are growing again. Immunology drugs, Skyrizi and Rinvoq, grew sales 65% in the quarter with revenue of $5.1 billion. The trajectory is great, but we’ll have to wait and see how these externally caused issues play out in the weeks ahead. HOLD

Ally Financial Inc. (ALLY – yield 3.6%) – This online banker has been bouncing around since late last summer. It was near the high point of the recent range, but the market took it down in the tumult of the last couple of months. The main bet with this stock is the economy. Ally specializes in auto loans, which are economically sensitive. It won’t react well to bad economic news. But the economy is holding up so far and could actually surprise to the upside. It’s good to have a cyclical stock in the portfolio in case things go that way. As long as the economy stays solid and the worst of the tariff uncertainty stays behind, ALLY should be strong and make up for some lost time. HOLD

Broadcom Inc. (AVGO – yield 1.0%) – This superstar AI company stock has been on fire recently. It did get clobbered in the earlier market and technology selloff, but it has come roaring back. AVGO has soared over 60% since the low of early April. It was taken down by external factors, and the stock is taking off as those problems dissipate. This should be a big week for AVGO as chipmaker Nvidia (NVDA) reports earnings on Wednesday. Nvidia is the bellwether for AI stocks, and positive results would likely provide another leg higher for AVGO. The other big tech company earnings indicate that AI spending is alive and well. AVGO might get a further big boost when it reports earnings next month. BUY

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. Revenues were up 31% and earnings increased 6% over last year’s quarter. The company also reported stronger margins as prices increased from last year. The main issue is that recently completed projects are coming online and will continue to do so for the rest of the year. Meanwhile, the administration is heavily promoting U.S. energy production, particularly liquefied natural gas exports. LNG was solid in the tough market and should trend higher over the rest of the year as long as natural gas demand doesn’t crater in a recession. HOLD

Constellation Energy Corporation (CEG – yield 0.5%) – The nuclear energy, and soon natural gas, electricity provider stock was red hot already and just got more good news. As of Friday’s close, CEG was up 33% in May and about 90% from the April low. The stock was taken down more than it should have been in the down market and is a leader in the recovery. The company also said that new power deals are soon to be announced after the stock got a huge boost from the two huge recent deals with Microsoft (MSFT) and Calpine Energy.

Last week President Trump signed a series of executive orders designed to accelerate the nuclear power industry. While demand for carbon-free electric power is huge, with the demand growth for AI from big tech, it takes forever to build new ones. The new orders seek to dramatically shorten the time frame and encourage more nuclear power. The Constellation CEO was present at the signing. This encourages more new deals from big companies to provide nuclear power for AI plants, and Constellation is king. HOLD

Digital Realty Trust, Inc. (DLR – yield 2.9%) – 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 in negative territory for the year and 13% below the high. Yet it has returned over 50% 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. HOLD

Eli Lilly and Company (LLY – yield 0.8%) – Things are still great at the company, but the stock has been struggling. LLY has been on a downswing and has returned -7% YTD and -11% over the last year. 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. There’s also the issue of “most favored nation” drug pricing. But it’s unclear how that will work and how much other nations will reduce their prices.

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 the stock 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 reported earnings that beat expectations. The stock has returned a whopping 26% YTD while the S&P is up less than 1% over the same period. MCK was downgraded to a HOLD rating as the healthcare sector is under pressure and will continue to be 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 issue. However, if the healthcare sector suffers, it will likely impact MCK in the near term. HOLD

Oracle Corporation (ORCL – yield 1.3%) – The market and the technology sector cooled off last week, but both are coming on strong so far this week. Artificial intelligence will continue to be a huge earnings catalyst well beyond tariffs and even economic news. Oracle has huge demand for its data centers and can’t build new ones fast enough to keep up. The demand should lead to stellar growth for years to come. With the tech correction seemingly out of the way, ORCL should be poised to move higher. BUY

Qualcomm Inc. (QCOM – yield 2.5%) – Last month’s earnings report was a clunker, and QCOM fell 8.7% on the day of the announcement. The earnings were mixed, with sales growing 17%, driven by strength in the automotive and IoT segments. But handset revenues grew only 12% and inventories rose. Also, revenue guidance for next quarter was slightly below the market’s expectations. Investors want to see strong handset sales, which is the core of the business and the area that could drive strong growth. And it didn’t see that. But the results were still solid, and those stronger sales should come later this year. Meanwhile, QCOM is benefitting from the tech recovery and has been stronger over the last month. HOLD

Toll Brothers, Inc. (TOL – yield 1.0%) – This beleaguered homebuilder company stock has reignited in the improved market. It’s up over 3% so far in May and about 20% from the recent low. The already beaten-down stock had held up well initially in the down market, but mortgage rates climbed again and the stock fell back. It has climbed back, and if the economic news remains OK, the recovery should continue. It would also help if mortgage rates came down, but they have spiked higher recently. But the trend is more likely to be lower at this point. The longer-term supply/demand dynamic is hugely favorable to this company, and it will muster a sustained upside move eventually. 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 nearly all of 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 has been moving higher again and is now within just a couple of dollars of the all-time high. WM should continue to be solid in just about any kind of market. BUY

Safe Income Tier

Rating change – “BUY” to “HOLD”

NextEra Energy (NEE – yield 3.3%) – The regulated and clean energy utility stock was strong but has since found more trouble. The stock initially pulled back on the spike in interest rates from the U.S. credit downgrade. Then last week the clean energy industry took a hit as the new bill in Congress passed the House with promises to strip 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 weather this storm in decent shape, and the stock is already recovering from last week’s selloff. 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 resumes some 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 when the market stabilizes. The risk is spiking interest rates, which seems unlikely at this point. 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 good. BUY

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.