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As we head into the end of the year, markets have paused though are still bullish. A little bit of worry is a sign of a healthy market and some of the pullback is no doubt taking profits for tax reasons.

The budget showdown in Washington, which needs to be settled by Saturday, is not helpful.

The Federal Reserve cut interest rates by a quarter point yesterday and in a preemptive move, suggested only two more reductions next year. This is a signal that interest rates will remain somewhat elevated as inflation that has come down significantly remains a stubborn trend.

In theory, and often as we prefer, in practice, corporate profits drive stock prices.

J.P. Morgan’s (JPM) booming profits are a testament to this, but what’s behind the profits?

It seems that recently, and perhaps even more in 2025, macro issues will drive the direction of markets and sector trends.

Identifying trends and allocating money to the right sectors and picking the leaders in these sectors is increasingly important. Those that follow the Fed and try to predict the direction of interest rates are one example of this macro-oriented strategy.

Explorer stocks had a good week led by Super Micro (SMCI) up 20% and Cloudflare (NET), up 9%, as PayPal (PYPL) has struggled a bit as it launches a new, higher-margin digital ad business. The S&P 500 is up 14% so far this year but the 10 biggest stocks recently represented almost 37% of the index’s total value, the highest since September 2000, according to FactSet. Use caution and take partial profits if you have some of these in your portfolio.

We have been discussing some great companies and breakthrough technologies, but it is easy to overlook that energy is the foundation of economic and technological development. It is also at the core of how countries secure and project national power.

So today, we add a U.S. renewable energy company that is a leader in an alternative energy source that’s making a comeback.

The first half results are in. The S&P 500 has had the worst first half since 1970. Not good.
All year long the market has grappled with the strong possibility that the Fed will have to induce a recession in order to tame the high and persistent inflation. There had been hope that a recession might be avoided. But recent evidence is indicating the recession scenario.

The market has improved from the heavy selling of last week. But I’m not buying this rally just yet.

At the low point of the selling last week, the S&P 500 was down about 19% from the high. That was dangerously close to a bear market, down 20% from the high on a closing basis. A bear market is an important psychological level that would likely prompt further selling if crossed. And we came right up to the cusp.

It looked grim for a while there. And we’re certainly not out of the woods yet. But hope has stopped the market decline, at least for now.



The broader S&P 500 index closed earlier this week at a YTD low, down over 16% for the year and over 17% from the high. It is dangerously close to the 20% bear market level which would officially end the bull market that started in March of 2020. That would be an important psychological level that would likely prompt more selling.

The great rebalancing is unfolding as we expected with the S&P 500 struggling while other global markets are gaining traction. The performance gap between U.S. and international equities so far this year is the largest since 2017.

With that in mind, today we add a new recommendation outside U.S. borders - albeit a company whose bread and butter is the U.S. market. It’s the best of both worlds.

Details inside.

Change is constant and inevitable, but one thing that hasn’t changed for the past three centuries: America’s love affair with coffee. Coffee is a commodity that has been prized since the 18^th century in America. Many believe it is the fuel that drives America’s economic engine.

So today, we add a fast-growing American coffee company to the Explorer portfolio. It might not be the name you’re expecting...

Super Micro Computer (SMCI) stock sank more than 19% yesterday after the troubled AI server maker’s results underperformed Wall Street’s expectations.

Super Micro reported adjusted earnings per share of $0.41 for its 2025 fiscal fourth quarter, less than the $0.44 expected by Wall Street analysts, according to Bloomberg consensus estimates. Its quarterly revenue of $5.76 billion was below the $6 billion expected, while its roughly $551 million gross profit for the period fell a little short of the estimated $601 million.

The gold-silver ratio is an intimate relationship. It indicates how many ounces of silver are needed to buy one ounce of gold. In the last century, this ratio reached its lowest point at just under 15:1 at the end of 1979 and peaked at over 110:1 during the COVID crisis.

This year, we passed the 100:1 mark for only the fourth time in a hundred years – a strong signal that silver may be underpriced.

So today, we add an aggressive silver play to the Explorer portfolio as a bet that it will close the gap on gold.

After a rough start to the year, the market has stabilized and recovered somewhat.

Earnings are terrific again. About 80% of S&P 500 companies have reported, with average earnings growth of around 23%. Earnings have saved and revitalized the market throughout the pandemic recovery. And this is another stellar quarter for corporate profits.

On balance, there’s little doubt the evidence worsened last week, and yet, most leaders didn’t crack, and the big-cap indexes didn’t either, so the question was whether a “real” correction was getting underway … or this would be yet another shakeout-type decline that gives way to higher prices. So far, of course, it’s looking like the latter. On Friday’s update, we dropped our Market Monitor to a level 6, but we’re going to quickly change course and go back to 7 today—and then stay flexible as we see whether a year-end run is getting underway or whether more volatility is coming.

This week’s list again has a growth tilt to it, which we find encouraging given the selling we saw in many areas of the market of late. Our Top Pick is a steadier leader in the AI (and solar) space and is testing its 10-week line for the first time—look to enter on strength and use a tight-ish percentage stop.

In a tough week for markets, Explorer stocks held their own. Banco Santander (SAN) shares are up 50% so far in 2025, significantly outperforming bank and European indexes. Luckin Coffee (LKNCY) was up 10% this week and Sea Limited (SE) shares have risen 25% rise so far this year. All our dominating stocks held firm this week.

It was interesting to be in Tokyo and meeting for lunch today with a former Japan Ministry of Finance official as new tariffs of 24% on Japan were announced.

The markets continue to lack direction and are buffeted by uncertainty regarding tariffs, taxes and spending, debt and conflict, but yesterday came to life as concerns over some of these risks were mollified. Nevertheless, broadening and diversifying your portfolio makes sense to maintain an objective of growth while also being mindful of protecting your wealth.

This brings us to gold - and today’s recommendation.

Alibaba (BABA) shares surged 15.5% this week as the company announced that it had completed a roughly $3.2 billion capital raise. Better yet, Baidu (BIDU) shares jumped a stunning 29% in the stock’s first week as an Explorer recommendation.

But could quantum computing be a bigger investment opportunity than artificial intelligence (AI) as the U.S.-China rivalry escalates?

Going back to 1960, nearly 85% of the cumulative total return of the S&P 500 Index can be attributed to reinvested dividends. And that’s why today we’re adding a new high-yield fund to the portfolio that gives us exposure to fast-growing overseas markets.

This was a good week for Explorer stocks, and as we head into the end of the year, Sea Limited (SE) is so far up 190%, IBM (IBM) is up 48% and Dutch Bros (BROS) was up 62% in November alone.

Tariffs are topic one in Washington and the financial media. Markets don’t know how everything will work out. Mexico is America’s largest trading partner, followed by Canada and then China. America still imports 4 million barrels of crude oil a day from Canada, which is also a key partner on the critical minerals front. More than half of America’s imports of fruits and vegetables come from Mexico. Automakers, which have built factories in Mexico to produce vehicles for the American market, are at risk and their stocks are falling at the wrong time.

But there’s one huge (non-Tesla) exception, which we will add to the Explorer portfolio today.

One of my favorite forever stocks is a digital payments company that’s taking advantage of growth in one specific market.