Author: Smart Investing

Income investing

Freedom 35 Blog: Could TLT Make a Big Comeback in 2025?

Posted on by Smart Investing

One of the more interesting developments in financial markets over the past few months has involved interest rates. As the Federal Reserve has lowered its short-term rates, long-term rates have trended higher. Typically, that’s the opposite of what should happen.

The 10-year U.S. Treasury even closed in on a 4.8% read at the start of 2025 before pulling back. What can investors expect from rates going forward?

First, it’s likely that traders were overly aggressive sending rates lower ahead of the Fed’s initial rate cuts. Now that the Fed has slowed the pace of its rate cuts, it’s clear that rates shouldn’t have declined as low as they have.

But it’s also clear that rates moved too high in response to that development. That suggests that investors may see rates tick lower in the months ahead. Cooler inflation or jobs data could also fuel a further move lower.

If that’s the case, then investors will want to own long-dated bonds. This can be done individually, or with ease with an ETF. One such ETF is the iShares 20+ Year Treasury ETF (TLT). TLT’s price should rise as yields fall, reflecting a rise in the price of the bonds in its portfolio.

TLT currently pays a 4.2% dividend, and the potential from capital gains as interest rates decline make it attractive.

 

To see the full analysis behind buying TLT now, click here.

 

Stock market strategies

A Wealth of Common Sense: How to Eliminate Negative Alpha

Posted on by Smart Investing

Investors seek alpha. That’s a simple term used to denote the profits made above and beyond the risk involved. Earning 30% in a portfolio of common stocks in a year the index returns 20% generates significant alpha.

But investors need to be aware of negative alpha. That means being in the wrong stocks at the wrong time. And underperforming the overall market as a result.

Generally, most investors tend to follow the market. If stocks have been rising, they throw caution to the wind and increase stock positions. Or, worse, take riskier positions.

When stocks fall, investors move to the sidelines after a decline. That’s also a recipe for poor returns.

Instead, investors may want to employ a strategy that moves contrary to the market. That means buying stocks when they’re down and fear is on the rise. Or selling stocks when prices are soaring higher.

Investors tend to think of cash as a poor investment decision. Over the long-run, that’s certainly true as inflation eats away savings. However, during a bear market, when stocks fall 20% or more, cash’s relatively flat return can prove a lifesaver.

And when stocks start to trend higher again, traders who lean into a rebound can see increased returns. This leads to improved gains and the avoidance of negative alpha during a market cycle.

 

To listen to the full strategy to eliminate negative alpha, click here.

 

International Investing

Beyond the Charts: The China Bull Market May Have Only Just Begun

Posted on by Smart Investing

For the past two years, large-cap tech stocks have dominated stock market returns. And the top tech stocks are also domiciled in the United States. Consequently, there’s been a growing value gap between U.S. stocks and the rest of the world.

After hitting a multi-year low, Chinese stocks have started to trend higher in recent months. Meanwhile, U.S. tech stocks have started to trade sideways. That suggests that Chinese stocks may have more upside ahead.

Thanks to the start of a rally in 2024, Chinese stocks had their best performance in years. That’s even amid fears of a slowing Chinese economy.

Plus, on a valuation basis, Chinese stocks remain far less expensive than their American counterparts.

For instance, Alibaba Group (BABA) trades at about 23 times earnings. That’s about half the valuation of Amazon (AMZN), a comparable company, which trades at over 42 times earnings.

With a relatively low valuation and a stock market now trending higher again, investors may see their best returns with Chinese stocks in 2025. Other international markets also trade at a lower valuation than U.S. stocks.

Given that tariff and tax uncertainties may impact all global markets, the relative value could prove the winner. Investors may want to shift some capital out of high-priced U.S. stocks and move to the value of Chinese stocks now.

 

To watch the full interview, click here.

Cryptocurrencies

Bitcoin Magazine: Buying and Holding Bitcoin Is the Best Strategy to Navigate the Trump Tariff War

Posted on by Smart Investing

Investors are shifting their views on markets following a renewed trade war, kicked off by proposed jumps in tariffs. Changing tariff rates can impact the flow of global trade, lead to shortages of some goods, and otherwise add some chaos to the economy.

That includes causing inflation to tick higher. So far, the actual tariff changes have been minimal. But proposals for big, bold tariffs likely mean more volatility ahead. 

In theory, that should be good for bitcoin. As an asset, it’s capable of moving globally in seconds without respect to trade barriers. However, the price it trades at could fluctuate wildly amid market disturbances.

Last weekend, as the tariff news came out, the crypto market sank. And it’s clear that leveraged traders were taken out by the rapid decline in cryptocurrency prices. Ethereum, the second largest crypto, sank by over 30% in just a few hours. That’s typical of the Wild West days of crypto, which many thought were over.

Even bitcoin sank to the low $90,000 range. However, the king of crypto managed to jump back higher the next day, as investors piled back in. This trading move in crypto suggests bitcoin has strong demand behind it. And it may be setting up for a new leg higher to new all-time highs.

If that happens, other cryptos should take off as well. But given the uncertainty in markets, bitcoin is the best crypto asset to hold amid risky conditions.

 

To view the full analysis, click here.

Retirement investing

Futures Edge Podcast: Decoding the Passive Bid in Markets

Posted on by Smart Investing

Investors have shifted their strategy in recent years. Rather than actively buy and sell stocks, shifting their mix over time, they’ve taken a passive approach. That’s been made possible with the rise of index investing.

The philosophy is simple. Why buy any one stock and be subject to a specific company risk when you can buy the entire market at once? Today, most investors have access to ETFs that offer nearly no cost for market exposure.

Since most active traders fail to beat the market over time, simply matching the market is a huge improvement. However, the rise of passive investing brings with it a different set of challenges.

For starters, most market indices are built around a weighting system. That means that passive investors are buying an index where a few big positions can dominate the index.

Currently, S&P 500 index investors have about a 28% weighting in the so-called Magnificent Seven big-cap tech stocks. That weighting is likely to rise as passive money flows in week after week.

In theory, if one of those stocks sells off heavily, it could mean a major index decline. And it also means that smaller and potentially faster-growing companies are underrepresented in a portfolio.

Investors should be aware of both the advantages and the dangers that passive investing provides today. Especially given the rise in passive investing for retirement funds.

 

To view the full podcast, click here.

Commodities

Kitco: Trade Tensions Drive Gold to New All-Time High

Posted on by Smart Investing

Stocks have now been trading in a range for the past two months, even as they remain near all-time highs. However, one asset is breaking higher: Gold.

The metal topped $2,800 per ounce last week, and had a high of over $2,870 this week. And held strong amid the tariff tantrum and latest trade war fears. Part of that move is the weakening of the dollar, coming off of a recent strengthening trend.

The latest tariff news creates uncertainty in the markets. So, it’s increasingly likely that there won’t be significant moves higher in the U.S. dollar. That bodes well for gold.

The metal had been climbing in dollar terms in recent weeks. Even as the dollar remained strong relative to other currencies.

So far, the latest tariff drama seems like a repeat of 2018. However, this time, President Trump is looking to move faster, and on a bigger scale.

Economists note that a tariff is a tax. And one that could reduce global trade. And drive up prices for many goods, fueling inflation. These uncertainties can likely drive gold higher.

Currently, central bankers remain large buyers of gold. That’s especially true for China, Russia, and Turkey. All three are nations that may be left in the proverbial cold in terms of U.S. trade.

These trends all point to a continued rise in gold as it continues to mark new highs.

 

To see the full analysis, click here.

 

Economy

The Compound: Profits Are Up 10% and Everyone Is Beating Estimates

Posted on by Smart Investing

Amid the tariff drama this week, investors were largely distracted by positive news coming out of the market. It’s still earnings season, and several large-cap companies were reporting this week.

Over time, growing earnings tends to be the best indicator of a stock’s success. Rising earnings across the board are a good sign that markets are in a healthy place for now. Conventional valuation may be a bit stretched, particularly with the tech stocks, but the earnings trend is bullish.

That may not translate into an immediate profit right away. For instance, tech giant Google (GOOG) managed to beat earnings expectations by 1%. Shares sold off heavily on the news, especially since the company’s cloud-related revenue was on the weaker side.

Chipmaker Advanced Micro Devices (AMD) also managed to beat earnings estimates. But investors are still rethinking the valuation of chip stocks following the launch of the DeepSeek AI.

Intelligence company Palantir Technologies (PLTR) soared to new all-time highs, jumping nearly 25% after earnings. Palantir is in a sweet spot given its software, its unique moat in the services it provides, and its push to profitability over the past year.

Generally, earnings are beating estimates. Especially for the big tech players that many thought would slow down. While stocks may be down after reporting earnings for various reasons, an earnings beat remains a long-term bullish sign.

 

To watch the full podcast, click here.

Stock market strategies

Elliott Wave Investor: It’s Been a Wild Week!

Posted on by Smart Investing

Stocks kicked off the week taking a dive, thanks to the latest tariff tantrum. Investors generally expected President Trump to increase tariffs and fulfill his campaign promise. However, the overnight declaration of universal tariffs against America’s neighbors was surprising.

Fortunately, those tariffs are on pause while agreements are reached. It’s possible that further tariff news will come out in the years ahead. Investors should approach the market with some caution going forward.

Notably, Trump’s tariff announcement came over the weekend. Markets were closed globally, and liquidity was light. As a result, the most liquid markets available were the cryptocurrency markets, which traded 24/7. Those markets bore the brunt of the news while waiting for further details.

So far, the market reaction looks similar to the 2018 period, during Trump’s last trade war and tariff threats. As long as the actual implementation of new tariffs is gradual rather than sudden, however, markets may be able to bear tariffs for longer than expected.

Given the new reality of uncertainty, traders may want to rethink their positions. That includes trades held overnight or longer, especially leveraged positions.

And when markets do drop on the news of a new tariff, the actual impact on markets appears short-lived for now. That may not always be the case, but traders who make contrarian buys during fearful panics may see some good short-term profit opportunities.

 

To look in more detail on the market’s volatility this week, click here.

Tech stocks

The Pomp Letter: Why Most People Are Wrong About DeepSeek AI and The Impact on Financial Markets

Posted on by Smart Investing

Tech stocks sank on Monday, following the release of the DeepSeek AI. Based out of China, the AI program claims it performs as well as ChatGPT. But, it does so at a fraction of the processing power and energy needed.

That news hit markets hard. After several years of big-tech stocks soaring, they now carry a hefty market weighting. What’s next for investors?

First, the news should be approached with some skepticism. There’s no independent verification of DeepSeek’s performance. And China has been less than honest sometimes about various developments.

Plus, claims about how little the development cost may not be accurate depending on how the AI sourced its data. Also, China is coming into its New Year. The country often likes to announce positive news going into the holiday.

In the meantime, it’s clear that there’s a global race for AI. And that AI programs will likely get faster, better, and cheaper. The big winner may not be investors in big tech companies going forward.

Rather, the winners will be consumers themselves. And as other companies are able to utilize AI programs, they can increase their productivity. That could allow other companies to flourish amid the AI boom.

Either way, it’s clear that the AI boom is just getting started. And that there will be more AI tools in the future.

 

To read the full analysis, click here.

Commodities

Lead-Lag Report: The Gold Strategy For 2025

Posted on by Smart Investing

After beating out the stock market last year, gold prices are poised for further gains. The metal has topped $2,800 per ounce this week for the first time. More impressively, that move has occurred as the U.S. dollar has been strengthening in global markets.

Investors are generally bullish, but several risks remain. A potential increase in tariffs could increase the cost of goods, and create further inflation. Under that scenario, gold’s returns could accelerate.

Meanwhile, governments continue to run deficits, even in a growing economy. A crisis of confidence could erupt in debt markets, which would likely send investors to gold. That crisis could take multiple forms, from a failed bond auction to a credit crisis.

The bond market continues to flash warning signs for investors. Bond yields have trended higher. That reflects rising uncertainty. Bond yields rising while most economic indicators are calm suggests that the market anticipates more inflation.

A rise in inflation tends to benefit gold prices as well.

Meanwhile, gold prices continue to outperform other assets such as lumber. That’s another historical sign that investors continue to see caution. Lumber prices tend to rise when the real economy is in growth mode, and gold tends to rise when inflation pressures remain strong.

Gold miners have underperformed during gold’s recent rally. That trend could change on a further rally in gold this year.

 

To watch the full interview, click here.