Dear Reader,
Good morning!
Today I want to talk about the often ignored, single-most important stock market indicator to check each morning…
And four stocks with the power to rocket even in a weak market.
In a note out from Raymond James last week, they analyzed how the yield on the 10-year treasury bond impacts stock prices.
Remember something - all professional investors use the 10-year treasury bond as one of the key pieces of an equation by which we value stocks.
And, ladies and gentlemen, the 10-year treasury yield is going to determine stock market performance more than anything.
We find in Raymond James’s research note that when 10-year treasuries pay below 4.5% interest, stocks deliver 10-15% average returns.
But when the 10-year hits 4.5%, the stock market’s average return drops to 1%.
When this treasury yield hit 4.6%, the market returned -2.4%.
Days the yield was above 4.7%, markets were down 35%!
The 10-year treasury yield determines the price of money, basically.
It determines the interest rate for so many things.
Many assets are tied to this yield.
A lot of folks wake up in the morning and check the market…
They say, let’s see how the Dow’s doing… the S&P 500… the Nasdaq.
You’ve got to add the 10-year treasury to your list of things you look at.
This is really what everyone should be looking at.
And since Moody’s downgraded U.S. debt, that’s gone up a little bit.
So this is going to continue to put pressure on the stock market in general.
Now, over the 35 years I’ve been doing this, what I’ve learned is when yields start to get this high, regular companies with average earnings growth… 10% a year… 7% a year…
Start to feel an immense gravitational pull downward.
Exceptional companies with super high growth rates in fast-growing industries also feel the pull downward.
But a handful of companies can actually have a rocket effect, where they’re able to pop out of the gravitational pull of these high yields pulling them down…
And companies that I’ve found capable of doing that in my 35 years’ experience…
Are companies with massive contracts…
Big partnerships.
So I turn my attention to President Trump’s trillion-dollar defense budget…
Pouring over $120 billion a year into fewer than 10 defense contractors.
Now, six of those are big. But four are really small.
So getting $3 billion… $5 billion… $10 billion, will be huge for these companies’ stocks.
They’re bound to rocket right into the stratosphere the way I see it.
That’s why we made such a big deal about them in our Iron Dome webinar.
I hope you get a chance to watch it again (or for the first time if you haven’t already).
Click here to watch “The 2025 Defense Stock Summit.”
If you are short on time, click here for a summary.
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