Category Penny Stocks

Last week, InvestorPlace Senior Analyst Louis Navellier decided to sell GigaCloud Technology Inc. (GCT) from his Accelerated Profits portfolio. 

At first glance, the move seems surprising – like watching a chef throw out a perfectly cooked steak. GigaCloud was a fast-growing tech firm with a sizzling 30%-plus rate of return. Revenue surged 65% last year, and net profits rose to $125 million – a sixfold increase from two years before 

However, GigaCloud specializes in large parcel shipping. It uses software to help pool small shipments into larger ones to save transportation costs, and its core business involves connecting Asian manufacturers with U.S. resellers. 

That business is now in trouble. 

On February 4, President Donald Trump imposed 10% tariffs on all goods imported from China – temporarily stopping all postal service shipments while the details were worked out. A month later, these duties were raised to 20%. 

This will have a devastating effect on GigaCloud’s industry. Many Chinese exporters already run on razor-thin margins; a 20% surcharge on all goods will throttle their business, slashing demand for GigaCloud’s logistics services. Analysts have dropped GCT’s 2025 earnings estimates by 20% since January, and more pain is likely.  

GigaCloud now scores a “D” rating in Louis’s Stock Grader (Navellier subscription required) – about as appealing as a one-star Yelp review. 

The Los Angeles area-based logistics firm isn’t the only company that will struggle with rising U.S. tariffs. As Trump said in an interview with Fox News host Maria Bartiromo, America’s now going through a “period of transition” that could see “a little disruption.” 

So, this week, I’d like to talk about three other companies Louis has recently sold to protect his portfolio from further disruption. If you have these stocks in your portfolio, you might also want to consider reducing your exposure to these less appetizing picks… 

Waiting for the Shoe to Drop 

When most people think of UGG shoes, they might picture comfortable sheepskin footwear used by surfers and college-aged students. The brand has a cultlike following and is particularly popular with the TikTok crowd. 

The modern college campus uniform

Investors, on the other hand, will know that UGG is a part of the Deckers Outdoor Corp. (DECK), a footwear conglomerate with a portfolio of popular names, also including Hoka, Teva, and more. It’s one of many brand-aggregating companies that regularly buy and sell these “assets” to maximize efficiencies and increase profits. In 2013, for instance, Decker acquired Hoka to build a comfort running shoe line, complementing its UGG offerings. Two years later, it bought Koolaburra and bolted it to its UGG brand.  

These efficiencies worked exceptionally well during boom years. Louis added shares of this fast-growing firm in Growth Investor last yearas margins surged and profits rose at double-digit rates. 

However, the “eggs in the same basket” strategy cuts both ways. The rise in Chinese tariffs now threatens Deckers’ profitability, and Louis sold the stock last month. 

Consider the sheepskin that goes into UGG and Koolaburra shoes. Deckers took this expensive material and made it far more affordable to younger buyers by running almost its entire supply chain through just two Chinese tanneries. Its manufacturing is also focused in just two countries – China and Vietnam. 

That puts Deckers at a significant disadvantage to brands with American-based manufacturing like New Balance. Analysts have slashed first-quarter earnings estimates by 20%, and profits are now expected to decline 29% year-over-year to $0.58 per share. DECK shares were already quite expensive because of their previously high growth, so they have further to fall. 

Derailing a Turnaround Story 

For years, our next stock to sell was known as much for its controversy as for its clothing. The mall retailer relied on hypersexualized advertising aimed at teenagers, and the CEO once infamously quipped his brand was “only for cool people.” He resigned in disgrace in 2017.  

Abercrombie & Fitch Co. (ANF) would eventually turn things around. The replacement CEO, Fran Horowitz, axed the company’s overtly sexual advertising and refocused the firm on a back-to-basics lineup targeted at 20-year-olds. Shares have returned 520% under her watch, prompting Vox to run a piece in 2024 explaining how the “once-maligned retailer quietly became a closet staple.” 

Rising tariff threats now threaten to derail Abercrombie’s turnaround. The apparel firm sources almost half of its production from Vietnam and China, and both countries face rising U.S. tariffs. Vietnamese officials are especially worried because their country runs one of the world’s largest trade surpluses with the United States – a factor Donald Trump has vocally criticized.  

That’s bad news for Abercrombie, which has historically relied on wide gross margins to offset its high overhead costs. Every 5% increase in its cost of goods will reduce net profits by 30%, and raising prices will prove tricky because cheaper alternatives to its “back to basics” lineup exist at rivals like Target Corp. (TGT). 

Louis also notes that ANF has seen a lack of buying pressure – a negative sign even when profits and sales are rising. He sold shares of ANF from Growth Investor last month, and I would recommend a similar action if you still have the apparel maker in your portfolio. 

Close to Home 

Finally, homebuilders are beginning to feel the pinch of U.S. tariff threats.  

On March 7, the Fannie Mae Home Purchase Sentiment Index dropped 1.8 points to 71.6 – its first year-over-year decline in two years. Sixty-two percent of Americans now believe it’s a good time to sell a house, while only 24% think it’s a good time to buy. The survey blamed the decline on high mortgage rates and “consumers’ growing concerns about their own personal financial situations.” 

That’s impacting American homebuilders, especially those focused on single-family home construction like Toll Brothers Inc. (TOL). On February 19, the luxury homebuilder noted that lower-end market demand had softened, and that the overall spring selling season had declined from “solid” to “mixed.” Management plans to reduce housing starts of “spec” homes – the riskier type (without a specific buyer) where homebuilders construct on the speculation that it will easily sell for profit. 

Rising input costs could impact homebuilders further. Homebuilders currently import 70% of softwood lumber from Canada, because the U.S. does not produce enough timber for domestic consumption. In addition, the U.S. also imports: 

• 45% of copper, used in household wiring 
• 62% of household appliances 
• 71% of gypsum, used in drywall 

That means tariffs will have a significant effect on home prices. According to CoreLogic, current tariff rates will raise the average new home price by 5% to $422,000 this year. This figure will get worse as more tariffs are enacted.  

Toll Brothers’ recent earnings miss now downgrades the stock to a “D” in Louis’ Stock Grader system, and he sold shares from Growth Investor last month.  

Buying Stocks in Times of Panic 

Trump’s first round of tariffs in 2018 were tough on many importers. Toll Brothers itself lost 10% of its market value by the end of 2019, while Abercrombie shed 15%. Some apparel firms like Forever 21 and Victoria’s Secret parent L Brands did so poorly that they were forced to reorganize. 

But many of America’s top tech firms did well in 2018. Over the same period, we saw dozens of tech firms go up. 

• Advanced Micro Devices Inc. (AMD) soared 285%. 
• Krystal Biotech Inc. (KRYS) jumped 459%. 
• Enphase Energy Inc. (ENPH) skyrocketed 689%. 

That’s because high-growth innovators don’t usually care if there’s a 10% surcharge on washing machines or a 25% price hike on timber. 

Instead, they care about the big ideas that will power the next generation of technology. Artificial intelligence… biotech… renewable energy… companies in these hypergrowth il often succeed despite macro headwinds. 

Now, I know this week’s selloff looks ugly. And we might be at the start of an even greater decline. Only President Trump knows how far he will escalate his trade war. 

But investors seeking a way out should consider watching Louis’ latest presentation on a technology that could create the next round of Nvidia Corp. (NVDA)-like gains. 

The fact is, at some point, quantum computing will have its “ChatGPT moment.”  

It could happen at Nvidia’s Q-Day on March 20. But even if it doesn’t, you’ll want to get in on this before the crowd, and time may be running out… 

By the time the mainstream public catches on to quantum computing, the truly massive gains will already be made. 

That’s why Louis has been urging investors to position themselves early. 

And one way to do that is by investing in the small-cap quantum computing stock perfectly positioned to profit from Nvidia’s quantum push. This company holds 102 patents and already works closely with Nvidia, Microsoft, Amazon, and NASA. 

Don’t wait until the market fully catches on. Watch the free replay of Louis’s Next 50X NVIDIA Call  for all the details – before it’s taken down. 

Click here to watch now.

Until next week,  

Thomas Yeung  

Markets Analyst, InvestorPlace  

Editor’s Note: The market may be turbulent, but innovation never stops — and that’s exactly why InvestorPlace Senior Analyst Louis Navellier remains confident. 

Just days ago, a little-known quantum computing called D-Wave Quantum’s announced a breakthrough in the quantum computing space. As a result, quantum stocks surged, with some gaining double digits in a single day.

Now, quantum computing today is where AI was back in 2016. So, it is an exciting investment opportunity that you won’t want to miss out on.

But let’s be honest: Quantum computing is complex, and understanding its real impact on the market can be challenging. That’s why Louis Navellier held an urgent briefing this past Thursday just one week before Nvidia’s big “Quantum Day” announcements – which could be a game-changer for the industry.

Click here now to watch a replay of that event.

Today, Louis is joining us to share more about D-Wave’s breakthrough. Take it away…

First of all, I want to thank all of the folks who joined my Next 50X NVIDIA Call special summit on Thursday.

We covered a lot of ground, including…

• NVIDIA Corporation’s (NVDA) upcoming Quantum Day (Q Day) event.
• The revolutionary shift quantum computing will bring to AI.
• The single stock I believe could deliver a 50X return – like NVIDIA did once the AI Revolution took off.

You can check out the replay of the Next 50X NVIDIA Call right here.

And as it turns out, our timing was perfect with this event.

Because while NVIDIA’s Q Day is still a week away, quantum computing stocks surged on Wednesday on some fresh news that I need to share with you…

Why Everyone Is Talking About Quantum Supremacy

It’s not every day that a single announcement sends an entire group of stocks surging by double digits.

But that’s exactly what happened on Wednesday when a little-known quantum computing company revealed a stunning breakthrough that shocked the market.

The company – D-Wave Quantum Inc. (QBTS) – released a statement saying that one of its quantum computers completed a complex materials-science simulation in just 20 minutes.

In fact, it was a task that would have taken Frontier, of today’s most powerful classical supercomputers, nearly a million years to finish.

What’s more, the company claims it is the first problem of real scientific importance to be solved with quantum computing. The results were published in the peer-reviewed journal Science.

In other words, D-Wave has achieved what quantum researchers and folks in the industry call “quantum supremacy”… using the technology to do something useful that no classical supercomputer could do.

This is a big deal, folks. Because if you’ve been following along with our quantum computing coverage this week, you know that up until recently, this stuff was constrained to government labs and universities.

To briefly recap, quantum computing operates at the subatomic level, using cutting-edge technology like ultracold superconducting chips. Quantum computers perform calculations with quantum bits, or “qubits,” which encode information differently than classical computers. This gives quantum computers the potential to solve problems far too complex or time-consuming for even the best classical supercomputers.

In this case, D-Wave used an “annealing” quantum computer, which specializes in optimization problems. These types of quantum computers find the optimal or most efficient solution by rapidly exploring a massive number of possibilities simultaneously.

In its groundbreaking test, D-Wave partnered with an international team of scientists to simulate “spin glasses,” a type of complex magnetic material with critical business and scientific applications. The simulations were performed on both D-Wave’s Advantage2 prototype annealing quantum computer and on Frontier, a classical supercomputer at the Department of Energy’s Oak Ridge National Laboratory.

The results were astonishing.

D-Wave’s quantum computer completed the hardest simulation in just minutes, delivering accurate data on complex lattice structures and magnetic behaviors. As I mentioned earlier, the same simulation would have taken nearly 1 million years on the Frontier supercomputer – and it would have required more electricity than the entire world consumes in one year.

The bottom line is that it seems like this was practical, tangible proof that quantum computing is nearly ready for real-world use.

As a result, on Wednesday, D-Wave’s shares popped 11% on the news…

Another popular quantum stock climbed 16%…

And my No. 1 quantum pick jumped 10%.

D-wave’s shares got another boost Thursday after reporting fourth-quarter and year-end results for 2024, rallying another 18%.

For the year, it reported an adjusted net loss of $75.6 million, or $0.39 per share. That’s a decrease of $7.3 million, or $0.21 per share from the previous year. Revenue was essentially flat year over year, but bookings were up 128% over the previous year ($23.9 million vs. 10.5 million).

Now, the key quantum computing players in this space are quite small. Most of them are trying to build up revenue, narrow their losses and achieve critical breakthroughs to commercialize quantum computing – all at the same time.

That’s a tough feat to pull off, but the upside is worth it. Because quantum computing has the potential to:

• Help biopharma companies discover breakthrough drugs faster than ever before. 
• Automakers develop driverless car systems that really work. 

• Chemical companies to develop materials we can’t even imagine. 
• And so much more.

Quantum Computing Continues to Advance

D-Wave’s breakthrough isn’t an isolated event, either. Quantum advances are happening at a rapid clip, folks.

Earlier this year, Google announced its quantum chip, Willow, which can execute calculations millions of times faster than traditional supercomputers. (We covered that here.) Amazon also recently unveiled its Ocelot quantum processor, and Microsoft recently launched Majorana 1, another quantum computing milestone. (I gave an overview of these chips here.)

Each of these breakthroughs confirms something critical: Quantum computing is rapidly transitioning from theory to practical application.

Big Tech recognizes this. And so does NVIDIA, the undisputed leader in generative AI chips. In fact, it’s already moving aggressively into quantum computing – even before its Q-Day event:

• It launched CUDA-Q, a quantum-classical hybrid platform, to help bridge the gap between traditional computing and quantum. The platform is specifically designed to integrate quantum processing units (QPUs) with NVIDIA’s graphics processing units (GPUs). As such, it could be the bridge to NVIDIA’s future beyond this decade.
• It’s actively developing quantum simulation tools, giving developers access to quantum-like environments before real hardware is widely available.
• And major industry players are already lining up to integrate NVIDIA’s tech into their quantum programs.

NVIDIA knows quantum computing will become essential once traditional computing hits its limits later this decade. And that’s why I hosted my Next 50X NVIDIA Call summit on Thursday.

But here’s the thing. As this news from D-Wave demonstrates, quantum computing isn’t just the future – it’s happening right now.

And while I like D-Wave, it is NOT my No. 1 pick in this space.

On March 20, I expect NVIDIA to make a MAJOR announcement with my No. 1 pick. And I covered all the details you need to know in my Next 50X NVIDIA Call summit.

The Future Is Happening NOW

It’s important to understand that as more (and bigger) groundbreaking advances are made, so too will the headlines.

Quantum computing today is where AI was back in 2016, right before NVIDIA’s historic 7,000% surge to its peak.

Remember, when I came across NVIDIA in May 2016, this was well before ChatGPT came along. That didn’t happen until November 2022. Now, NVIDIA has returned more than 600% since then… but the reality is most people missed out on the 6,400% gains before that.

The fact is, at some point, quantum computing will have its “ChatGPT moment.”

It could happen at NVIDIA’s Q-Day on March 20. But even if it doesn’t, you’ll want to get in on this before the crowd, and time may be running out…

And by the time the mainstream public catches on to quantum computing, the truly massive gains will already be made.

That’s why I’ve been urging investors to position themselves early.

And one way to do that is by investing in the small-cap quantum computing stock perfectly positioned to profit from NVIDIA’s quantum push. This company holds 102 patents and already works closely with NVIDIA, Microsoft, Amazon, and NASA.

Don’t wait until the market fully catches on. Watch the replay of my Next 50X NVIDIA Call now for all the details – before it’s taken down.

Click here to watch NOW.

Sincerely,

Louis Navellier

Editor, Market 360

Louis hereby discloses that as of the date of this email, Louis, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below: NVIDIA Corporation (NVDA)

The stock market has been stuck on a roller coaster for months now, zooming up and down ever since November’s U.S. presidential election. 

But over the past few weeks, stocks have been experiencing a particularly painful rout, with the S&P 500 crashing more than 10%, the Nasdaq falling about 15%, and the Russell 2000 collapsing nearly 20%.

But amid this Wall Street chaos, we see a fantastic buying opportunity unfolding. 

In fact, we think stocks may have bottomed this past week – and they could soar from here over the coming months. 

There are four critical tenets to our bull thesis… 

The Stock Market Is Washed Out, But the Economy Isn’t

First, things feel washed out. 

As we mentioned, the major indices have taken a plunge, dropping between 10% and 20%. All three have now fallen into oversold territory. 

Meanwhile, valuations on a lot of individual stocks have dropped to 2- or 5-year lows. The University of Michigan’s Consumer Sentiment Index has crashed to one of its lowest levels in the last 50 years. And investor sentiment in the American Association of Individual Investors’ (AAII) weekly survey has only been this consistently bearish once before – back in March 2009. 

Across the board, things are just really washed out. When conditions are this dour, stocks can rebound furiously as they climb the proverbial ‘wall of worry.’ 

Second, the economic reality is not so bleak. 

We understand Americans’ concerns about tariffs, federal spending cuts, policy uncertainty, and their potential impacts on consumer spending and business investment.

But as of now, at least, those impacts are still contained. 

As we noted in yesterday’s issue, U.S. gross domestic product (GDP) growth is still positive at 2.3%. Consumer spending is steady. Unemployment is low at 4.1%. Inflation is falling, currently hovering around 2.8%. At about 4.3%, according to the Federal Reserve Bank of Atlanta, wage growth is strong and running above inflation. And as the fourth-quarter earnings season illustrated, corporate profits are still growing, with more than 75% of the S&P 500 exceeding consensus estimates. 

So… sentiment and market conditions are washed out, but the economy is not. This divergence is not sustainable. 

Either the economy becomes just as washed out, or sentiment and market conditions rebound. We don’t see the economy nose-diving anytime soon, and therefore, we think a rebound is coming.

Calling the Bottom

Third, multiple technical signals suggest this could be the bottom for stocks, as we’ve detailed over the past week. 

The Nasdaq 100 just fell below its 200-day moving average for the first time in a year. Similarly, the S&P 500 dropped below its 250-day moving average for the first time in a year. The market has become oversold, again for the first time in a year. 

All this happened this past week. And historically speaking, when these things have occurred before, the market usually went on to soar over the next 12 months, so long as stocks stabilized around these major technical levels… 

Which also happened this week. 

The S&P 500 fell multiple times toward the ultra-critical 5,500 level and never gave it up. It bounced every time. This past Tuesday, it bounced right above there and then did so again multiple times on Thursday. Then, stocks soared on Friday and – as of this writing – the S&P retook its 250-day moving average. 

Stocks are stabilizing exactly where they should. From a technical perspective, that tells us that the market has found a bottom and that stocks will soar over the next few months.

We’ve been talking about quantum computing a lot lately – and rightfully so.

After all, Big Tech is making major investments in it, including Alphabet Inc. (GOOG), Microsoft Corporation (MSFT) and Amazon.com, Inc. (AMZN). They’re developing quantum chips that can perform computations in seconds that would normally take a classic computer thousands of years to complete.

But of all the Big Tech companies, I think NVIDIA Corporation (NVDA) is on the path to becoming the leader, which it will make clear to all the other quantum players next Thursday, March 20, when it hosts its Quantum Day, or “Q Day.”

This is where I predict NVIDIA will make a major announcement. Not only will it cause my No. 1 pick to take off like a rocket, but it will also fuel a fresh rally to help turn the entire market around. (For more details on the event, click here and watch a replay of my summit, The Next 50X NVIDIA Call.)

But the reality is we can’t take our eye off what else is going on in the markets right now.

You see, tariffs have continued to weigh on investors.

On Tuesday, March 4, Trump implemented 25% tariffs on Canada and Mexico, as well as the 20% tariffs on China. That sent the stock market spiraling lower. Even though President Trump backpedaled and postponed some of the tariffs on Canada and Mexico until April, it was too little, too late for many investors. And this week, he placed a 25% tariff on steel and aluminum, and threatened a 200% tariff on alcoholic products from the European Union (EU) if it doesn’t remove the tariff on imported American whiskey.

I know that a lot of investors are rattled by the ongoing “tit for tat” between President Trump and Canada, Mexico, China and Europe.

Obviously, a lot of people in the media aren’t fans of President Trump. And I will acknowledge that he can be a bit erratic. But the ultimate goal of all this is to have free trade.

For example, the European Union charges a 10% tariff on American cars imported into Europe. The U.S., on the other hand, charges 2.5%.

You get the idea.

The fact is this is really up to Commerce Secretary Howard Lutnick.

I know Howard Lutnick – my son went to school with his son, and I think he’s a wonderful guy. He’s going to be a cheerleader for America, and the ultimate goal is to have trillions in onshoring.

This “tit for tat” has certainly weighed on the markets, but thankfully, some positive data mid-week helped bring some investors off the sidelines. I’m talking about the latest Consumer Price Index (CPI) and the Producer Price Index (PPI) reports.

These reports were critical, because investors and consumers alike are beginning to feel pressured by all this tariff talk.

The Federal Reserve is feeling the heat as well. So, in today’s Market 360, let’s take a look at this week’s latest inflation reports and what they mean for future key interest rate cuts. Then, I’ll share more about how you can take advantage of the next investment opportunity that could turn the entire market on its head.

Markets erupt higher… is this rebound real or a temporary?… diagnosing why stocks are falling… the dance between sentiment and earnings… don’t miss Louis Navellier’s 50X small-cap idea

As I write Friday, stocks are ripping higher.

Is this the beginning of a sustained, bullish rebound? Or bullish fool’s gold before the next leg lower?

To help answer this, let’s diagnose the problem.

The market currently has a “sentiment” problem.

The good news is that – at least for the moment – it’s not an “earnings” problem as well. And that should limit how much downside remains in front of us, if there’s any at all.

Let’s break this down.

There are two key variables that influence the price of each stock you own

• The earnings of your underlying companies
• The multiple that investors are willing to pay for those earnings – which we can think of as “investor sentiment”

In the short-run, investor sentiment is unquestionably the greatest influence on stock prices.

On any given day, gleeful or despondent investors can drive stocks to unfathomable heights or depths based on greed and fear.

But in the long run, stock prices always return to their true master: earnings.

To illustrate, check out the chart below that shows us the key drivers of stock performance over various lengths of time.

The column on the left shows us the drivers over one year. “Multiple” (which means “investor sentiment”) is in red; it’s the dominant influence at 46%. Revenue growth (the basis for “earnings”) is in blue; it accounts for just 29% of stock-price performance.

But see how this flips the further out you go (the columns to the right).

After 10 years, sentiment drives just 5% of stock performance.

For another angle on this, below is a chart dating to 1945 comparing the S&P 500’s price to its trailing 12-month operating earnings.

Notice how over the long-term, these two lines have an amazingly strong correlation. This underscores our point: In the long-run, earnings drive stock prices.

But also, you’ll see how the S&P’s price line (in green) bounces all around the S&P’s much smoother earnings line (in blue).

This is showing us how price – pushed and pulled by sentiment – soars and crashes… yet always returns to the earnings line.

Source: Investment Strategy Group, Bloomberg, S&P Global

So, where are we with this earnings/sentiment dance today?

In recent weeks, the stock market has been tanking largely due to the investor sentiment part of the equation

And this just prompted legendary investor Louis Navellier’s favorite economist, Ed Yardeni, to lower his S&P 500 forecast.

Yardeni has been one of Wall Street’s leading bulls in recent years – which has been the correct call. Today, he remains broadly bullish. To that end, he hasn’t changed his forecast for 2025 earnings, but he’s pulling back on his sentiment multiple.

From MarketWatch:

Yardeni is sticking with his view that S&P 500 companies will earn a combined $285 per share…

But he is blinking on the valuation multiple, now expecting a range of 18 to 20 instead of 18 to 22.

That takes Yardeni’s best-case scenario down to 6,400 from 7,000 (and also his year-end 2026 view down to 7,200 from 8,000). His “worst-case scenario” for the end of 2025 is now down to 5,800.

The good news is that Yardeni’s updated “worst-case scenario” still has the S&P climbing almost 4% from where it trades as I write.

This isn’t to say that Yardeni doesn’t recognize the potential for earnings to take a hit. Here he is, with a warning:

The latest batch of economic indicators released on Monday, Tuesday, and Wednesday supported our resilient economy scenario with subdued inflation.

Nevertheless, we can’t ignore the potential stagflationary impact of the policies that Trump 2.0 is currently implementing haphazardly.

But Goldman Sachs has, in fact, lowered its earnings forecast due to tariff wars

It’s not a drastic reduction, from $268 to $262. For perspective, the broad Wall Street consensus is $270.

Here’s MarketWatch explaining:

[The reduced earnings forecast is] in reaction to Goldman’s economists earlier this week lowering their GDP view on expectations of a 10-percentage-point tariff-rate increase.

The simple math is that every five-percentage-point increase in the tariff rate reduces S&P 500 earnings by 1% to 2%.

The new earnings forecast also took into account elevated uncertainty and tightening financial conditions.

Meanwhile, like Yardeni, Goldman also lowered its sentiment multiple. But again, not by much – from 21.5 to 20.6.

From Goldman:

The headwinds to equity valuations from a spike in uncertainty are typically relatively short lived.

However, an outlook for slower growth suggests lower valuations on a more sustained basis.

But here, too, Goldman sees stocks climbing from here to end of 2025, even after its reduced forecast. It puts the S&P at 6,200 by year-end, which is 11% higher.

So, if earnings are remaining relatively robust in these projections, then might this “sentiment” correction be healthy?

Yes.

At the end of last year, sentiment had reached bullish extremes. That type of enthusiasm is fun, but it’s flimsy and usually doesn’t last for too long.

Below, we look at the S&P 500’s price in light blue compared with the change in the S&P’s forward 12-month earnings estimate dating to 2015.

Notice how price (in this case, our loose proxy for sentiment) had soared far higher than earnings estimates coming into 2025.

Source: FactSet

So far, given that earnings are holding up well, the pullback has reflected waning sentiment – but this has meant that the price/earnings divergence has narrowed to a more reasonable level.

If we want a long-term bull, this is good news. It’s like letting some air out of an overinflated balloon.

But will this pullback remain a relatively mild “sentiment” drawdown or intensify into a “sentiment + earnings” bear?

That’s the question.

After all, a “sentiment” pullback would mean we should be looking for great buying opportunities today. A “sentiment + earnings bear” would suggest a defensive posture.

Here are some numbers on the two scenarios…

MarketWatch found that when stocks fall 10% but don’t enter a recession, buying the S&P (after it has fallen 10%) has delivered gains six months later nearly 90% of the time (using data since 1980).

But if both sentiment and earnings take a hit, resulting in a bear market, the median S&P 500’s peak-to-trough pullback would be a 24% decline.

Let’s return to the question…

Do we need to be prepared for another massive leg lower in stocks due to an earnings collapse?

It doesn’t appear that way currently.

Here’s FactSet, which is the go-to earnings analytics group used by the pros:

For Q2 2025 through Q4 2025, analysts are calling for earnings growth rates of 9.7%, 12.1%, and 11.6%, respectively.

For CY 2025, analysts are predicting (year-over-year) earnings growth of 11.6%.

It’s going to be very hard to have a deep, sustained bear market with that kind of earnings growth.

Meanwhile, FactSet reports that while executives have been discussing tariffs on their earnings calls, they haven’t been mentioning “recession” with any great urgency.

Back to FactSet:

Through Document Search, FactSet searched for the term “recession” in the conference call transcripts of all the S&P 500 companies that conducted earnings conference calls from December 15 through March 6.

Of these companies, 13 cited the term “recession” during their earnings calls for the fourth quarter.

This number is well below the 5-year average of 80 and the 10-year average of 60.

In fact, this quarter marks the lowest number of S&P 500 companies citing “recession” on earnings calls for a quarter since Q1 2018.

But what about the recent GDP reduction that points toward a recession?

To make sure we’re all on the same page, the Atlanta Fed’s GDPNow Tool provides a “nowcast” of the official GDP estimate prior to its release by using a methodology similar to the one used by the U.S. Bureau of Economic Analysis.

As I write, it’s showing a steep contraction of -2.4%.

Source: Atlanta Fed

We need to take this with a big grain of salt.

To explain why, here’s Louis from Wednesday’s Flash Alert podcast in Breakthrough Stocks:

The data doesn’t support us going into a recession.

Now, I’ve mentioned to you folks that the trade surpluses are ridiculous because companies were dumping goods on America.

The first indication was the 34% surge in January. We’ll see what the February trade number will be, but that could cause negative Gross Domestic Product (GDP).

However, according to the Institute of Supply Management (ISM), manufacturing has been growing for two months in a row after contracting for 26 months, and services actually picked up.

The U.S. is a predominantly service-led economy, so the data doesn’t support the narrative that we’re going into a recession.

Circling back to our focus on earnings, Louis is the perfect person to chime in on today’s theme of “sentiment” and “earnings”

After all, as we highlighted in yesterday’s Digest, Louis’ entire approach to the market centers on identifying stocks displaying fundamental strength.

True to form, here’s what Louis said on Wednesday to his subscribers:

I want to reassure you that earnings are working.

I also want to reassure you that when we had this very sharp correction that analysts never cut their estimates…

We’ll keep an eye on everything, and we’ll just keep you in the crème de la crème – the best stocks.

Speaking of crème de la crème, a reminder that Louis just flagged his top quantum computing stock. He believes it has 50X upside potential as quantum computing technologies hits the mainstream (there’s breaking news on this that we’ll feature in Saturday’s Digest – be on the lookout).

Louis also pointed toward a key catalyst happening this coming Thursday – Nvidia Corp.’s (NVDA) “Quantum Day.” Here’s Louis:

Next Thursday,I believe Nvidia will stake its claim in the quantum computing space. And when it does, this little-known top pick could erupt overnight.

Yesterday, I revealed everything you need to know about Q-Day – including details on my No. 1 stock pick that could explode in the wake of NVIDIA’s announcement.

To check out Louis’ full presentation, click here.

Coming full circle…

So, what are we to conclude from all this?

Here’s the quick-and-dirty:

• Our current drawdown is largely “sentiment” driven. At present, that gives the edge to this being a buying opportunity
• Based on current earnings forecasts, it’s unlikely we’ll devolve into an earnings recession, which would usher in a more damaging bear market
• However, tariff wars could change the calculus depending in their severity and duration
• Focusing on the earnings strength of your specific stocks is the best way to avoid unnecessary stress – or kneejerk decisions – in a market climate such as this one.

We’ll keep you updated.

Have a good evening,

Jeff Remsburg

This past Tuesday marked the five-year anniversary of when the World Health Organization declared the COVID-19 outbreak to be a “pandemic.”

Following the news, investors panicked and the markets crashed. While this was five years ago, I want to bring this up today because the folks at Bespoke Investment Group recently pointed out that the S&P 500’s actions over the past three weeks have been eerily similar to the same three-week period in 2020.

You may recall that the S&P 500 peaked and hit a new all-time high on February 19, 2020, then plunged for three weeks. In 2020, the S&P 500 lost more than 19% during those three weeks as the COVID-19 pandemic and lockdown intensified.

Now, I want to remind you that the same three-week period in 2025 has been terrible – but not nearly as horrible as 2020.

Consider this: The S&P 500 peaked and broke through to a new all-time high on February 19, 2025. Since then, the index dropped by about 10% by yesterday’s close, officially ending in “correction” territory. Now, a bounce back in the markets today may pull it out… for now, at least.

But the tech-heavy NASDAQ has been in full-blown correction territory for a few days now.

The point is, whether we’re talking about 2020 or today, one thing is clear: Uncertainty is the source of the selling.

Today, we’re once again looking at a grossly oversold stock market – and I know that you’re wondering if and when a rebound will occur.

Well, it could be happening now. The markets closed on an incredibly positive note today. But stocks often bounce back – by a lot – in market corrections before retesting lows.

So, in today’s Market 360, I’d like to take some time to talk about what corrections are, why the markets have been selling off lately and why you shouldn’t panic. Then, I’ll explain the catalyst that I think will turn this market around, starting next week…

Consumers are feeling gloomy about the economy right now… and the University of Michigan’s awful Consumer Sentiment Report shows that the outlook is only getting worse. 

There’s no other way to put it – consumer sentiment is crashing. The university’s headline index dropped from 64.7 in February to 57.9 in March, its lowest level since November 2022. 

The Current Conditions Index dropped to 63.5, its lowest since September 2024. And the Expectations Index dropped to 54.2, its lowest since July 2022. 

Across the board, consumer sentiment is collapsing. But this is not a new trend; it’s been happening all year long. 

Over the past three months, consumer sentiment has dropped by 21%, its largest three-month crash since the depths of the COVID-19 pandemic in summer 2020.

That’s ugly data. 

However, as we all know, there’s perception, and there’s reality. 

In reality, are things really that bad?

At 2.3%, gross domestic product (GDP) growth is still positive. Consumer spending is steady. Unemployment is low at 4.1%. Inflation is falling, currently hovering around 2.8%. At about 4.3%, according to the Federal Reserve Bank of Atlanta, wage growth is strong and running above inflation. And as the fourth-quarter earnings season illustrated, corporate profits are still growing, with more than 75% of the S&P 500 exceeding consensus estimates. 

Sure, we have ongoing tariff drama and policy uncertainty. But the economy still remains on solid footing. 

So, while sentiment is in the basement right now, the real economy appears to be doing just fine. 

That could change, of course. But as of right now, economic conditions are pretty normal. 

That’s why we think consumer sentiment will rebound over the next few months – and as that happens, stocks should, too…

Is the Bottom Near?

Consumer sentiment is currently being walloped by tariff drama, federal spending cuts, and policy uncertainty. But we think all those dynamics will ease in the coming months. 

In our view, the Trump administration is front-loading these moves so it can pave the way for other things – like a big tax cut package and more deregulation – which should boost consumer sentiment. 

That is, we believe temporarily bad policy developments are weighing on consumer sentiment. But as the administration shifts focus in the coming months, consumer sentiment should rebound. 

The data seems to agree with this thesis.

The University of Michigan’s Consumer Sentiment Index has crashed to levels that are historically considered the “bottoming zone.” 

Since 1980, consumer sentiment has oscillated violently between really low and really high readings. But it has consistently bottomed in the 50 to 60 range. 

In 1980, amidst the Federal Reserve’s aggressive rate-hiking cycle, it bottomed at 52. In 2008, it bottomed at 55 during the financial crisis. It bottomed at 56 in 2011 during the European sovereign debt crisis and at 50 in the thick of 2022’s inflation crisis. 

The consumer sentiment index just dropped below 58. Historically speaking, we’ve reached the bottoming zone. 

If this truly is the bottom, then this could be a really good time to be buying stocks…

Because big consumer sentiment rebounds out of the bottoming zone – like we saw in the early 1980s, coming out of the GFC, in 2012/13, and in 2023/24 – coincided with major market rebounds. 

You can spend a lot of time searching for stocks to buy.

You can study for hours and learn how to analyze stock charts and corporate balance sheets. You can spend hours going over financial statements.

But if you’re like a lot of people, you don’t have the interest or the time. You’ve got a job and a family, and they keep you busy.

The good news is there’s a shortcut around doing all that work.

You can simply look for businesses that have increased their dividends for at least 10 years in a row.

Remember, dividends are cash payments distributed to a company’s shareholders. Only businesses with durable competitive advantages can pay increasing dividends for more than a decade (on top of all their other financial obligations).

Out of the more than 5,000 publicly traded businesses, less than 5% of them meet this high standard of quality.

These businesses are the beachfront real estate of the stock market.

Some legendarily profitable and stable members of the “dividend raiser” club include:

• Johnson & Johnson (NYSE:JNJ)
• McDonald’s (NYSE:MCD)
• Automatic Data Processing (NASDAQ:ADP)
• IBM (NYSE:IBM)
• PepsiCo (NASDAQ:PEP)
• 3M (NYSE:MMM)
• Wal-Mart (NYSE:WMT)
• Procter & Gamble (NYSE:PG)
• Coca-Cola (NYSE:KO)
• Chevron (NYSE:CVX)
• ExxonMobil (NYSE:XOM)

The longer the string of consecutive dividend increases, the more impressive it is. Only truly fantastic business with durable competitive advantages can increase their dividends for 20, 30, or even 40 consecutive years.

As of 2019, discount retailer Wal-Mart has increased its dividend payment every year for 44 years. Oil giant ExxonMobil has increased its dividend payment every year for 36 years. Soft-drink giant Coca-Cola has increased its dividend payment every year for 56 years.

These businesses paid and increased their dividends through recessions, government shutdowns, wars and real estate busts. They paid their dividends during the dot.com bust. They paid their dividends during the 2008–2009 financial crisis — the ultimate dividend “stress test.”

In terms of consistency, these firms rank just behind the rising sun.

Companies with more than 10 or 20 years of consecutive dividend increases are the strongest, safest companies in the world. Many of these firms sell “basic” products like medicine, soda, food, candy, cigarettes, toothpaste and deodorant.

Ordinary companies can’t raise their dividends for 10 or 20 consecutive years. In fact, they probably won’t even exist that long. This is because their business models are shaky, unpredictable and vulnerable to competition.

The average investor will spend lots of time chasing hot tips from brokers, coworkers and relatives. He’ll chase “get rich quick” schemes. He’ll try to pick stocks based on chart patterns. He’ll stay up at night worrying about the risky stocks he owns.

It’s bizarre behavior when you realize there is a group of elite, dividend-paying businesses available to him. He’s choosing SPAM over filet mignon.

Instead of owning risky stocks, I like the predictability of owning robust, reliable businesses like McDonald’s and Coca-Cola.

I can’t pick the next hit website, the next miracle drug, or the next retail fad — but I know it’s very, very likely that folks will keep eating burgers, drinking soda, and brushing their teeth.

Again, you can spend lots of time learning how to analyze business… you can spend a lot of time searching for them. Or, you can simply “weed out” over 99% of stocks by focusing on companies with long strings of consecutive dividend increases.

Several of these lists are compiled each year. One is called “Dividend Achievers.” It’s the list compiled by NASDAQ of companies that have increased their dividends for at least 10 consecutive years. As of 2019, there were 264 members of this list.

Another list is called “Dividend Aristocrats.” It’s the list of S&P 500 companies that have increased their dividends for 25 consecutive years. As of 2019, there are only 57 members of this list.

You can think of these lists as “cheat sheets” for finding the world’s best businesses.

You work hard for your money. Don’t abuse it by investing in low-quality businesses.

Instead of buying unproven business based on whims, chart patterns, and hot tips, demand quality from the businesses you buy.

One of the greatest indicators of business quality is at least 10 years of consecutive dividend increases. This is the blue ribbon worn by the best public businesses.

Over at Profitable Investing, my friend Neil George has done more “due diligence” on this than the folks at NASDAQ or S&P Dow Jones.

And of the many stocks Neil covers, he recommends just a handful of stocks that have raised their dividends for 10 years or more, plus meet Neil’s other criteria. Click here to find out more about Neil and how he picks stocks.

Regards,

Brian

P.S. Once a particular “dividend raiser” catches your eye, the next step is to consider the price. Too many investors think you have to pay up for great investments. That just isn’t true. And I’ve got a simple strategy to buy elite stocks at bargain prices.