The Path Forward for Stock Investors
The recent plunge of stocks amidst crazy volatility is causing more angst than usual for retail and institutional investors. Investors are tired, worried, unclear of short vs long term objectives, and uncertain of which are the best stocks to buy right now, if any.
With the implementation of the Trump tariffs, economies are at a turning point, where politicians and business leaders realize they cannot rely on the US consumer any longer. Countries such as Canada are being forced to venture out into a difficult international trade environment to support their economy for the decades ahead.
The stock market is peaking after an incredible 12-year bull run fueled by high deficit government spending. Who will or can fuel the next leg of wha tech-driven bull market? Can the US turn the debt/deficit corner without trillions of continuous stimulus spend? We’ll get to see the outcome in the next 5 years and your portfolio will prove your market insight and investing wisdom.
Normally, we think of retail investors as always taking the brunt of these bad market events and downtrends. In fact, the volatility is like a bucking bronc, trying to get rid of these investor cowboys on top of it, while institutional investors sit in the stands watching the show.
See which stocks investors typically buy during boom times.
Hedge Funds, Banks and Billionaires All Banking on Big Tech
Watching these same major investment gurus suffer with big losses on their Mag7/large cap portfolios, we know few are really on top of this 2025 stock market. Of course, given it’s driven by uncertain politics and reactionary negotiation making a forecast of stock prices challenging. It was easy before, but the easy wins seem to disappearing. Now we get to see who really knows how to invest.
The path forward might be paved with wisdom, choosing quality stocks, avoiding risk and waiting patiently for the economic dust to settle. Yet, buying stocks right now might cause you to lose big time. It’s buyer beware for sure and selling or sitting on the sidelines is the choice of wisdom. It’s a good time to research and dispel your harmful myths. Bitcoin, NVDIA, Palantir, Boeing, Microsoft, and even all mighty Google could all be in peril if the trade war picks up speed.
Which is the Wiser Path at This Juncture?
As an investor, you’re likely pulling your hair out wondering what investment path to take. You’re likely paralyzed and looking for clarity, same as everyone else. If you’re searching on Google or Bing, or asking ChatGPT or DeepSeek for answers, you might not get too far. Everyone’s trying to sell something, not to give you clarity. In fact, if you’re confused, they have a better chance to sell you something you don’t really want.
New Bull Run or the End of the Road?
Some experts believe the stock market is at the beginning of a new bull run while others believe this is the end of a very long bull run, with a high rate/high inflation stagflation scenario about to deepen. Who is right?
Do you believe Donald Trump really has this whole situation under control, and can stop a runaway train? Or, will the US soar under the pro-America plan after a rough start? Will he reverse the tariffs? All scenarios are in play.
The bond market is heating up a bit as stock market investors begin to see the value in the safety of bonds and fixed-income securities. Bond yields are around 4.5%. When bonds are hot, institutional investors are thinking trouble is brewing.
Stocks are trading at a P/E ratio of 31 which is very high but not a record height (NVIDIA PE ratio as of February 27, 2025 is 55.67). It hit 132 in 2009, where we saw the 2nd great market collapse of all time. When P/E ratios have been this high in the past, a stock market crash ensued. We saw it in 2000, 2008 and 2020. It didn’t matter if stocks where in the Dow Jones, S&P500, NASDAQ or Russell 2000 indexes. They all crashed.
Should you invest like Warren Buffet, choose quality companies with a long term outlook and sit tight? A lot of investors are copying Berkshire’s investment choices. He’s amassed a mountain of cash ($334.2 billion) and is waiting to buy something. What does he have in mind?
There are certain cautionary fundamental issues to keep in mind, such as:
- Massive US government debt payments
- Unrelenting, massive US trade deficits fueling more debt
- Severe supply chain disruptions reducing US GDP
- Strong counter-tariff penalties against the US and reduced markets for US exports
- Political uncertainty and poor decisions
- Inflation and rising interest rates
- Consumer pessimism and spending cutbacks
- Evidence of stagflation and FED stubbornness
- US GDP on the downtrend
- Massive, expensive deportation of illegal migrants underway
- GDP per person is growing
- US government spending is trending down
- AI obsession eliminating jobs, eroding wages
- housing market nearing record lows in sales with new construction starts faltering
- AI requires excessive power, investment and commitment from government
Does Trump Really Have the Power to Turn the US Around?
The biggest question you should have is whether Donald Trump has this under control, and whether he even has the power to change the course that was set for the USA by previous administrations. Some believe the hole the Democrats have dug is too deep to overcome. That implies that only miracles will work. At the end of the day, the economy has to roar and the US must continue to make its debt payments, or face bankruptcy at some point. Trump believes a roaring economy will help the US surmount the $36 Trillion dollar debt and $1 trillion trade deficit issues.
The path forward for the US and international economies is uncertain with plenty of potholes and damage to come. Yet, the path forward for smart investors might be one of good common sense choices with a 5 year outlook.
7 Types of Stock to Review for Boom Times
During economic boom times, investors often gravitate toward growth stocks that benefit from strong economic growth, increased consumer spending, and those with higher corporate earnings. These stocks typically fall into cyclical sectors, which perform well when the economy is expanding.
Here are some types of stocks and sectors that investors commonly buy during boom times:
1. Cyclical Stocks
- Definition: Companies whose performance is closely tied to the health of the economy.
- Examples:
- Consumer Discretionary: Companies like Amazon (AMZN), Nike (NKE), and Home Depot (HD) benefit from increased consumer spending on non-essential goods.
- Automotive: Companies like Tesla (TSLA), Ford (F), and General Motors (GM) tend to perform well as consumers have more disposable income to spend on big-ticket items.
- Travel and Leisure: Airlines (e.g., Delta Air Lines (DAL)), cruise lines (e.g., Carnival Corporation (CCL)), and hotel chains (e.g., Marriott International (MAR)) thrive as people spend more on travel and experiences.
2. Technology Stocks
- Why: Technology companies often experience strong growth during economic expansions due to increased business investment and consumer demand for innovation.
- Examples:
- FAANG Stocks: Meta (META), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL).
- Semiconductors: Companies like NVIDIA (NVDA), AMD (AMD), and Intel (INTC) benefit from increased demand for electronics and computing power.
- Software and Cloud Services: Microsoft (MSFT), Salesforce (CRM), and Adobe (ADBE).
3. Financial Stocks
- Why: Banks and financial institutions tend to perform well during economic booms due to higher interest rates, increased lending activity, and stronger corporate earnings.
- Examples:
- Banks: JPMorgan Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC).
- Insurance Companies: Berkshire Hathaway (BRK.B), Chubb (CB).
- Payment Processors: Visa (V), Mastercard (MA), and PayPal (PYPL).
4. Industrial and Infrastructure Stocks
- Why: Industrial companies benefit from increased construction, manufacturing, and infrastructure spending during economic expansions.
- Examples:
- Aerospace and Defense: Boeing (BA), Lockheed Martin (LMT).
- Construction and Machinery: Caterpillar (CAT), Deere & Company (DE).
- Transportation: FedEx (FDX), Union Pacific (UNP).
5. Energy Stocks
- Why: Energy demand typically rises during economic booms as industrial activity and travel increase.
- Examples:
- Oil and Gas: ExxonMobil (XOM), Chevron (CVX), and ConocoPhillips (COP).
- Renewable Energy: NextEra Energy (NEE), Enphase Energy (ENPH).
6. Commodities and Materials
- Why: Companies in the materials sector benefit from increased demand for raw materials used in construction and manufacturing.
- Examples:
- Mining: Freeport-McMoRan (FCX), BHP Group (BHP).
- Chemicals: Dow Inc. (DOW), DuPont (DD).
7. Small-Cap and Growth Stocks
- Why: Smaller companies and growth stocks often outperform during economic expansions due to their higher sensitivity to economic conditions and potential for rapid earnings growth.
- Examples:
- Small-Cap ETFs: iShares Russell 2000 ETF (IWM), SPDR S&P 600 Small Cap ETF (SLY).
- Growth Stocks: Companies in emerging industries like electric vehicles, fintech, and biotech.
You might want to look for companies that will still be standing and thriving 5 years from now. The US economy will grow because Trump’s intent is to see it thrive again. At this point, there is much resistance to change, and he’ll have to weather that storm to get to the sunny days ahead.
Good advice would be to stop investing in risky, get rich opportunities right now. Those stocks will likely be the first to collapse in a likely market crash. I say that because Trump’s expectation of the progress of this transition of government money printing to private sector revival is too quick. It can’t happen that fast, and the coming crash is simply investors adjusting to reality.
Dig in with research and an open mind with the best stock research tools and reliable investor analysis, that is politics agnostic. Go for stocks that will outlast the turmoil. Avoid bitcoin and gold, and look at industrials, mining and financials for the great times after 2025. This is a year of rapid, major adjustments like a ride on bucking bronco.
See more on the 3 month to 5 year outlooks along with what might be some of the best stocks to buy now.
