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“You don’t get rewarded for taking risk, you get rewarded for buying cheap assets. And if assets you bought got pushed up in price simply because they were risky, then you are not going to be rewarded for taking a risk, you are going to get punished for it.” – Jeremy Grantham

The Three Pillars
On Financial Sense Newshour, we often emphasize that our investment philosophy and market approach are built on three key pillars: 1) fundamentals, such as economic factors and corporate earnings; 2) technicals, including market internals like breadth, momentum or investor sentiment; and 3) “politicals,” which encompass fiscal, monetary, and regulatory policies. The movement of the markets is largely shaped by the interaction and convergence of these three critical factors.I cannot recall a time in my investment career when political factors have had such a profound impact on financial markets. Not since Ronald Reagan have presidential policies influenced the markets and business sentiment to these levels. Since the November elections, the S&P 500 and Dow have reached all-time highs, bitcoin has surged by 46%, and gold has climbed to a record high of $2,840. The markets are exuberant over the potential of Trump’s pro-business policies while simultaneously fearful over tariffs, trade wars, and a dramatic reshuffling of global alliances.This convergence of optimism and uncertainty has created a highly charged investment landscape, where policy decisions (the “politicals”) can trigger swift and dramatic market reactions. Investors are balancing the promise of deregulation, tax cuts, and domestic industrial investment against the risks of escalating trade tensions and geopolitical realignments. The sharp moves in equities, gold, and digital assets reflect this push-and-pull dynamic, as markets attempt to price in both the opportunities and the risks posed by a second Trump administration. In this environment, staying ahead requires not just understanding economic fundamentals, but also closely tracking the evolving political landscape.

Macro Constraints
The next four years are certain to bring new winners and losers, but it’s also important to remember that Trump will face certain limits that are not fully under the control of American presidents.Consider, for example, the vastly different macroeconomic environment compared to his first term in office. Interest rates are now in the 4–5% range, a stark contrast to the near-zero levels of 0.0–0.5% during his earlier term. Oil prices are fluctuating between $70–$80 per barrel, up from $40–$50, and the national debt has surged to nearly $37 trillion, compared to $19 trillion previously. Additionally, interest on the debt now accounts for 13% of the government’s budget and is the fastest-growing component of federal spending.These shifts create a dramatically different playing field for economic policy and market dynamics. Higher interest rates limit the government’s flexibility to stimulate growth through borrowing, while elevated oil prices add inflationary pressures that could complicate efforts to keep consumer prices in check. Meanwhile, the ballooning national debt and rising interest payments constrain fiscal policy options, making deficit spending a more precarious tool. Against this backdrop, the administration’s approach to trade, taxation, and industrial policy will take on heightened significance—potentially amplifying market volatility and reshaping investment strategies in ways that may differ sharply from prior decades.

Market Moving Policies
When it comes to the political factors that will likely determine the ups and downs of the market this year and beyond, here is a list of some of the most important:

It is an ambitious agenda, unmatched since the days of Ronald Reagan. However, achieving these goals will require unity within the Republican Party to pass and implement these policies in a challenging macroeconomic environment marked by higher interest rates, soaring deficits, rising oil prices, and elevated inflation. Despite these obstacles, given the President’s strong mandate, I anticipate that several key policies will move forward, including the extension of tax cuts, the implementation of tariffs, ending the war in Ukraine, and reforming the government.The economy and the markets will be impacted by these policies, and we are going to be repositioning our portfolios to take advantage of the strategic shift in the financial markets. Areas we see as opportunities are in well-positioned technology companies aimed to capitalize on the ongoing advancements in AI, robotics, automation, and drones. We also like industrials, energy and electricity, as well as consumer staples.

A Bubble in the Making
As we analyze the investment markets, we are observing a shift away from the Mag 7 stocks toward value stocks, as price-to-earnings (PE) multiples have reached some of the highest levels in US history. Source: Advisor PerspectivesCurrently, the PE multiple for the Dow stands at 29, the S&P 500 at 25.5, the Nasdaq at 33.4, and the Russell 2000 at 35 (source). These PE multiples are high, but they are even more elevated for the Magnificent 7 stocks. Broadcom’s current PE stands at 83.31, Nvidia at 46.7, Microsoft at 33.02, and Meta at 29.15, with the average PE for the MAG 7 reaching 46 (data from Bloomberg). The issue with PE multiples this high is that they are priced for perfection, leaving little room for error. When an unexpected event or an earnings miss occurs, the stock price can plummet—just as it did with Nvidia following the surprise release of China’s latest DeepSeek model, which was supposedly much more efficient and less costly to build by requiring a much smaller number of high-end GPUs.Another factor I have seen over the last two years is that cash flow and dividend increases aren’t as large as they were when we entered this decade. Companies have seen their profit margins impacted by inflationary factors from rising labor to higher raw material costs. A good example is Coca-Cola (KO), which used to increase its annual dividend at an annual rate of 7-8%. However, this rate how now declined to just 3.5% annually. I have found it is harder to find high quality companies that fall within my 10% dividend rule of dividend and dividend increase equal to 10% per year. As a result, I have sought instead to find beaten up stocks that are down 30-50%, that carry low PE multiples and higher current dividends. We own 5 companies with yields of 6-8% and we are finding more opportunities within the other 493 stocks that make up the S&P. Strategically, we are making a pivot to industries that will do well under a Trump administration. This is where we see opportunities.

Energy
Trump is in favor of “drill baby drill,” but implementing it won’t be so straightforward. Oil companies today are far more disciplined than in the past and are unlikely to expand production if it risks their profitability. After all, they are in the business of making money. We anticipate oil prices firming up as depletion rates on shale wells accelerate, making it increasingly difficult to sustain production growth.The energy opportunity we see is in the natural gas space in its ability to provide cheaper, reliable, and clean-burning electricity for data centers, AI, and the cloud. The oil producers that we own are building natural gas plants for this very purpose along with supplying the fuel to power them. Another opportunity lies in the export of natural gas to Europe and Asia where the price can be 3-4 times higher than the US as Trump lifts the natural gas export ban.In terms of oil demand, it is still growing globally with demand expected to rise to 105 mbd in 2025, an increase of 1.4 mbd over 2024 (source). The International Energy Agency (IEA) and Energy Information Administration (EIA) continue projecting falling oil demand due to the energy transition and the adoption of EVs. They have been way off the mark, having to repeatedly make upward revisions to their forecasts as shown below: Source: Goehring & Rozencwajg, gorozen.comThe IEA has consistently understated demand for the last 15 years. Contrary to the claims made by experts and politicians, we will continue consuming oil well into this century. The ambitious goals of achieving a carbon-free, fossil-free world by 2030 or even 2050 are more of a wishful fantasy than a reality. It is the one reason we own oil majors and have added two pipeline companies that will supply data centers and exports to Europe and Asia with natural gas. Our pipeline companies are paying dividends of over 7% and growing their dividends by high single-digits each year.

Utilities
Utility stocks have traditionally been considered “widows and orphan stocks” because of their stability, relatively low risk, and predictable dividends, which often grow at a modest rate of 2-4% per year. Nothing exciting, but generally safe and predictable. That’s changing with AI and the cloud, which uses an enormous amount of electricity. Utilities that are in states with large data centers are seeing demand growth of 3-4% a year, something we haven’t seen since the 60s and the 70s.There are seven main data centers located in seven states that we expect to offer above-average growth possibilities with greater earnings and dividend increases. I have made our first purchase in this sector for this year and have my eyes on another utility located near the largest data center in the US.In this environment, we believe adding utilities to our portfolio will complement our energy investments, particularly as they align with the growing demand for powering AI and cloud technologies. Utilities play a critical role in providing the reliable and scalable energy infrastructure needed to support Trump’s pro-growth policy efforts in energy-intensive industries.

Technology
We see plenty of opportunities in the technology space, especially around AI, robotics, automation, and drones. In the AI space, we are primarily playing AI through electricity by owning utilities that supply power to data centers and the natural gas pipeline companies that will supply the gas to power them.Another area we are exploring is a company that manufactures servers designed to house Nvidia chips, serving not only domestic markets but also nearly 50 countries globally that are pursuing their own AI capabilities. The stock has dropped 42% during the recent tech correction, presenting a potential opportunity to acquire it at an even lower valuation if the correction continues.As the US reshores its factories, robotics will play a pivotal role in making factories competitive on a global scale. If you want a glimpse of the future of manufacturing, simply look at an Amazon warehouse or a Tesla factory. A driverless Uber is not too far off, and Tesla is at the forefront of this sector, positioning itself as a leader in the next wave of automation and innovation.Drones are another area we are looking at as it is a game changer in the delivery of goods as well as in warfare. In the next few years, you will order your prescription from CVS or Walgreens and a drone will likely deliver your prescription to your doorstep in the same day.In the military sphere, the US is working on drone attack planes that can take off and land on aircraft carriers and the US Navy is increasingly investing in unmanned systems both in air and underwater. Underwater submarines can operate discreetly making them difficult to detect and can stay underwater for extended periods of time making them useful for persistent surveillance and reconnaissance.

Industrials
The reshoring of factories began gaining momentum during the first Trump administration but became a concerted effort due to the supply chain challenges experienced during the COVID shutdown. These disruptions highlighted the vulnerabilities of relying heavily on overseas manufacturing, pushing companies to bring essential parts of production back to the US to ensure greater resilience and reliability.The Biden Administration passed several bills creating incentives to bring manufacturing back to the US from green technology to computer chips. This is likely to accelerate under Trump with a possible lower tax rate of 15% for companies that exclusively manufacture goods here in the US. He has also threatened companies who are considering closing down US plants and shifting to Mexico with tariffs on the goods they will ship back to the US. Samsung is relocating its Mexico factory to the US. Other major companies like Ford, GM, John Deere, and Samsung are choosing to expand domestically rather than moving offshore.In addition to these efforts, we’re seeing significant investments in US innovation and infrastructure. Projects like Stargate—a $500 billion collaboration focused on AI dominance—and Saudi Arabia’s $600 billion investment in the US reflect the global shift toward strengthening AI and technology ecosystems within the United States. These initiatives signal a transformative period for US industry and technology leadership.The US is in a transitional phase between the third and fourth industrial revolution. The fourth industrial revolution will focus on the following technologies:

We aim to capitalize on this transformative trend by strategically adding key industrial stocks to our portfolio in the months and years ahead.

Commodities and Precious Metals
It is our view that the fourth commodity supercycle is underway as the demand for raw materials needed for manufacturing accelerates. Factories need raw materials to make things from iron ore, silicon, copper, silver, lead, zinc and nickel. As shown below from our friends at Goehring & Rozencwajg, commodities are the most undervalued they have been over the last 100 years. Source: IEA, Goehring and RozencwajgIn this environment, we are also positive on the outlook for silver as industrial demand now makes up 70% of annual silver demand and silver is running a five-year deficit as underground supplies diminish from Mexico to around the globe (source). We believe silver is undervalued, held down by continuous short positions by investment banks and the commercials. In addition to industrial demand, silver is also a monetary metal that is selling at depressed prices compared to its historical norm. The gold-silver ratio averaged 47:1 in the 20^th century. In this new century, it has ranged between 50:1 and 70:1. The current ratio stands at 88:1. We see large upside potential in silver as that ratio normalizes in the 40-50 range driven by growing demand from industry, investors, and large silver deficits.

Gold-Silver Ratio
Source: MacroTrends
We currently own two silver stocks and view them as long-term holdings. Given the increasing demand for precious metals and historical price trends, we believe silver prices have the potential to surpass their previous $50 highs if historical norms reassert themselves.We increased our exposure to precious metals in 2019 at an attractive entry point, and looking back, this marked the beginning of the first leg of a new bull market. The demand for precious metals continues to be driven by their role as a hedge against declining currency values worldwide. With governments overspending and central banks resorting to money printing—likely increasing further to inflate away sovereign debt—we believe gold and silver remain critical stores of value.Both Trump and Vance have expressed support for a weaker US dollar to boost manufacturing competitiveness and exports, which could further enhance the appeal of precious metals as a hedge against currency debasement.We see gold and silver as long-term holds this decade, serving as protection against inflation, currency devaluation, and geopolitical risks. Currently, precious metals stocks are generating strong cash flows, paying dividends, and trading at depressed valuations relative to the recent price movements in gold and silver. Put simply, we see them as unloved, under-owned, and undervalued.

Conclusion
Given the change in Washington and the bubble-like quality of the Mag 7 stocks within the S&P 500, we are making a strategic pivot away from what is expensive and overvalued to industries that are likely to grow given the policy initiatives coming out of the Trump administration. We also recognize the large technological advances in AI and robotics and are actively seeking strategic ways to capitalize on this trend. Rather than focusing solely on direct AI and robotics companies, we aim to diversify our exposure across a range of supporting industries and sectors that will benefit from this technological revolution.In terms of portfolio yield, we expect to meet our targets through the addition of new holdings with higher dividend yields. Additionally, we see compelling opportunities in the value sector, where certain companies have already undergone their own bear markets, experiencing declines of 40-50%. This significant pullback has, we believe, reduced downside risk, allowing us to acquire these stocks at steep discounts, aligning with our value-driven investment approach.More By This Author:Will Trade Wars And Tech Disruption Derail The Bull Market?
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