The Ugly and the Bright Side

The trade war escalates... Where does it stop?... Looking on the bright side... Mega-cap tech is down... The rest are doing well... Potential signs of a near-term bottom... Greg Diamond goes live tomorrow...

The market has not considered tariffs the 'most beautiful word in the dictionary'...

Contrary to President Donald Trump's description of these import levies, stocks sold off yesterday as key tariff deadlines approached and again today as they went into effect.

At midnight last night, the White House imposed 25% tariffs on Mexican and Canadian imports and added another 10% to Chinese goods. Canada and China responded with retaliatory measures, and Mexico promised the same to come.

Then, this afternoon, Trump threatened more tariffs on Canada...

The country's outgoing Prime Minister Justin Trudeau announced a 25% duty on roughly $20 billion of U.S. goods, and the province of Ontario instituted a 25% tax on electricity exports to 1.5 million homes in Minnesota, Michigan, and New York. Trump wrote on social media...

Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!

Where does it stop? Nobody seems to know.

In the meantime, the major U.S. indexes went for a roller coaster ride today, opening lower, rallying in the afternoon before selling off into the close. The S&P 500 lost 1% on the day and is now down about 6% since an all-time high on February 19.

I (Corey McLaughlin) wrote last week that the "Trump bump" postelection rally had fizzled. As of today, it is gone.

The bright side...

If someone told you a significant trade war would break out and the S&P 500 would only drop 6% from its all-time high, you'd probably take it, right?

Of course, it may feel overwhelming to keep up with the volatility related to tariffs and other issues we've seen in the first two months of Trump's second term. Questions remain about tariff impacts... And as we wrote yesterday, growth concerns are real. But with the reality of a round of tariffs in the bag, the worst of their influence on the market could be behind us.

Our Stansberry's Investment Advisory lead editor Whitney Tilson, for instance, is still constructive on stocks today. As he wrote in his free daily newsletter today, he's not panicking over volatility...

I don't think that President Donald Trump wants to trigger a likely spike in inflation and a recession. (There's a reason his signature book was entitled The Art of the Deal!) I think there will be a deal.

When it comes to the markets, my advice is still the same: If you own good stocks or funds, ignore the short-term noise and volatility.

I make no prediction where the market goes in the short term, but my "spidey sense" isn't telling me that we're on the verge of a big (say, 10% or more) market pullback.

"Spidey sense" aside, there are other indicators suggesting the same. Today, for example, Ten Stock Trader editor Greg Diamond alerted subscribers to a trade to take advantage of one part of the market that is the "most oversold it has been since its lows in late 2023."

A key level...

Also today, Dan Ferris and I recorded a new episode of the Stansberry Investor Hour podcast, which will come out next week.

Our guest was Jeffrey Hirsch, editor of the annual Stock Trader's Almanac. He mentioned he's watching the 5,700 level in the S&P 500 for signs of technical "support" – where buyers outnumber sellers – based on various indicators he trusts.

This sounded familiar, because Marc Chaikin – founder of our corporate affiliate Chaikin Analytics – said almost the same thing writing in his free PowerFeed letter last week...

If the S&P 500 breaks the January lows at 5,800, a full-blown correction of 10% to the 5,500 level is a possibility.

Stocks are trading right near this level as of today's close.

Looking beneath the surface...

Let's check in on market concentration... Regular readers will know that we've highlighted the major stock indexes' concentration in a few names as a warning sign for broader markets.

At the end of 2024, the top five stocks in the S&P 500 – Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL) – made up 29% of the market-cap-weighted index. It's reminiscent of the concentration during the "Nifty Fifty" bubble of the 1960s.

If you understand this, it's clear that "buying the market" doesn't offer the diversification many investors believe it does. Even after these stocks have sold off some in early 2025, the five still make up more than 26% of the S&P 500.

So folks simply buying index funds are concentrated in only a handful of companies – and they're all in the same sector with many of the same risks, be it tariffs or anything else.

When things are going well with these leaders, you probably don't hear many people complaining. Mega-cap tech stocks helped propel the markets higher at a time when other stocks weren't as strong.

In 2024, the S&P 500 surged 25% after posting a 26% gain in 2023. At the same time, the Invesco S&P 500 Equal Weight Fund (RSP) – which, as its name implies, gives equal weight to each of the index's 500 companies – "only" returned 13% last year, and 14% in 2023.

But that trend might be starting to turn...

The 'rest' are doing better...

At the start of 2025, even amid the volatility we've seen, we're already seeing more strength in RSP than in the S&P 500. The equal-weight index is now outperforming the market-cap-weighted index that most people refer to as the "market."

While the S&P 500 is down 1.5% so far in 2025 and 6% from its February 19 high, RSP is up slightly on the year and down about 4% from its high. This is the reason Dan called RSP the "right way" to buy the S&P 500 in a Digest essay last month.

As Dan pointed out, if today's Magnificent Seven stocks – the five listed above plus Meta Platforms (META) and Tesla (TSLA) – are truly the "Nifty Fifty" of our day, a drawdown in those shares would and will drag the entire market lower.

The equal weight index won't be immune to it. But it does stand to outperform in the recovery versus the broader market. As Dan wrote...

According to our friend Jason Goepfert over at SentimenTrader, RSP is compelling these days. In a recent post on X, Goepfert published some data showing that the equally weighted S&P 500 recovered in less than half the time of the cap-weighted index in the wake of the Nifty Fifty peak in 1973.

In a more recent notable example, RSP hit a new high almost a year before the broader market in the aftermath of the 2008 financial crisis.

It may sound "silly" that the same 500 stocks could outperform, just with equal weightings, Dan says. But that's exactly what will provide the diversification that folks expect in an index fund.

It's still too early to tell if the recent outperformance from RSP is just a blip or the start of a longer-term trend. But this is behavior worth noting. It could be a signal that the market action we've seen at the start of 2025 could be a spicy form of healthy market "rotation."

A sign of a near-term bottom?...

Not to be totally trite, but here's another possible indicator of a near-term bottom. Look at this story from CNBC today...

Goldman Sachs rolls out suite of downside protection ETFs as market volatility picks up

Goldman Sachs Asset Management has thrown its hat into the ring of increasingly popular buffer exchange-traded funds, just as the stock market is showing some signs of fragility.

On Tuesday, the firm announced the launch of the Goldman Sachs U.S. Large Cap Buffer 3 ETF (GBXC). That follows two similar funds that launched in recent months.

This rollout strikes me as a kind of "magazine cover indicator" that tends to coincide with tops or bottoms in particular stories or trends.

When something gets so popular that it ends up on the cover of Fortune (like, for example, FTX founder Sam Bankman-Fried did in 2022), the story is fully baked. Any associated gains may have already been made.

Similarly, the time to add "downside protection" to your portfolio is before the downside happens. That's why it's called protection. You may lose some money on the deal – like insurance premiums – but that's what it's there for. After all, you wouldn't buy flood insurance when your basement was already under a foot of water.

Incidentally, this is why our Dr. David "Doc" Eifrig's options-selling strategy in Retirement Trader can work so well when market "fear" is high. It delivers profits from other people's fear, making you the insurance seller rather than buyer and collecting income along the way.

Greg Diamond is considering a few scenarios...

As we mentioned yesterday, Greg – our in-house technical analysis expert – was eyeing up a potential "contrarian trade setup" in stocks. Sure enough, this morning he alerted his subscribers to just that.

Out of fairness to these paying subscribers, I can't give away the details of the trade in the Digest, but I do want to share the context about the possible outcomes Greg is considering for the rest of this month for U.S. stocks. As Greg wrote...

1) Stocks simply melt down over the next three weeks... While this would hurt in the short term, it would clearly mark a significant low to trade.

2) Stocks create a significant low this week, with late March marking a higher low in many indexes/stocks.

3) Stocks create a low this week, with a lower high into the middle of this month and one last drop into late March...

One of these scenarios is "the most likely setup," Greg says. Again, existing Ten Stock Trader subscribers and Stansberry Alliance members have access to all of Greg's work and his latest trade recommendation.

But if you don't and you want to learn more about his strategy and market outlook, Greg's going to share more insight – for free – during his latest weekly live YouTube video tomorrow. He now goes live at 1 p.m. Eastern time every Wednesday.

Based on how things have been going the past few weeks, I'm sure a few more potential market-moving headlines will flash between now and then. In these free videos, you can see how Greg thinks and considers trading opportunities on the fly and see if his trading strategy is right for you.

Here's a direct link to where you can find Greg's latest live video tomorrow. You can set a notification to get a reminder when the video begins. And don't forget to subscribe to our YouTube page, too. That way you can ask Greg questions directly during the show.

I suggest you do that to also make sure you know about all of our free videos... like Greg's, the Stansberry Investor Hour video version, and more to come. Simply go to our Stansberry Research YouTube page right now and click the big "Subscribe" button.

New 52-week highs (as of 3/3/25): AbbVie (ABBV), Abbott Laboratories (ABT), Automatic Data Processing (ADP), Alpha Architect 1-3 Month Box Fund (BOXX), Brown & Brown (BRO), CME Group (CME), Fidelity National Financial (FNF), Gilead Sciences (GILD), Masimo (MASI), Medtronic (MDT), Paychex (PAYX), Republic Services (RSG), Verisk Analytics (VRSK), VeriSign (VRSN), and Vanguard Short-Term Inflation-Protected Securities (VTIP).

In today's mailbag, more feedback on new White House policy, including an impassioned view from Canada... Do you have a comment or question? As always, e-mail us at [email protected].

"Regarding subscriber Robert B.'s comment [in yesterday's mail], I second the motion." – Subscriber Dennis G.

"Any crypto other than Bitcoin added to the strategic reserve will be a huge strategic mistake imo. I have no desire for my tax dollars to fund s*** coins. They will be pumped and dumped like meme stocks..." – Subscriber Terry D.

"On some comments regarding Canada/Mexico tariffs, the poster failed to mention President Trump's reasoning about why he's putting tariffs on Canada. 'Canada is letting massive amounts of illegal drugs and illegal migrants across the Canada/US border into the USA'.

"Seriously... no one actually believes this do they? Data from both countries show that the US border patrol seized a total of 0.2% of illegal drugs coming into the US at Canada's border (09/2024 pre-Trump) and 96.6% coming in from Mexico. The US Drug Enforcement's 2024 National Drug Threat Assessment report never even mentioned the word Canada once.

"On the issue of illegal migrants... 2023 – 2,475,670 crossings intercepted from Mexico and 189,400 from Canada, 2024 – 2,135,000 from Mexico and 198,900 from Canada. Canada, I might add, had a surge with northbound incoming asylum seekers from the US particularly in the latter half of Mr. Trump's first term...

"I welcome Canada tightening border security both to keep the US safer and, in my case, to also keep both drugs and illegal guns out of my country. President Trump wants to reset the US economy as much as possible on the backs of other countries. Not particularly a new concept. But to do his bidding by piling on the lies, attempted intimidation and insults to other countries and their citizens, and breaches of existing international agreements (shall I mention signed by himself) is unforgiveable...

"Canada is not the source of US problems, but we have become Trump's example. If I can do this to my friends just imagine what I'll do to my enemies. How can we ever trust the US gov't again? Canadians will have their voices heard and I for one (and there are many) will avoid the US like the plague if this doesn't end very soon.

"I would appreciate your readers hearing from the Canadian side... I am a proud Canadian with both American family and friends from the Carolinas, to the west coast, to the North Dakota plains (where I lived less than 10 miles north of the border for a good portion of my life). Trump insults me and my American family and friends too (who know better than to believe his rhetoric regarding Canada)... I fear and feel our relationship will never recover." – Subscriber J.J.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
March 4, 2025

Stansberry Research Top 10 Open Recommendations

Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation.

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

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Top 5 highest-returning open positions in the Crypto Capital model portfolio

Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio.

Stansberry Research Hall of Fame

Top 10 all-time, highest-returning closed positions across all Stansberry portfolios

^ These gains occurred with a partial position in the respective stocks.
* The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%.

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