Defense stocks to buy as spending bill moves through Congress; trading small caps
(This is a wrap-up of the key money moving discussions on CNBC's "Worldwide Exchange" exclusive for PRO subscribers. Worldwide Exchange airs at 5 a.m. ET each day.) Investors are looking for opportunities in the oil and natural gas space. They are also eyeing a tailwind for defense stocks in President Donald Trump's spending bill. Worldwide Exchange Pick: EOG Resources Patrick Fruzzetti of Rose Advisors said EOG Resources is a good buy despite the decline in oil prices. "It's a premium driller with a great balance sheet, good assets they have been in West Texas for a long time, they are expanding in Utica (Ohio)," said Fruzzetti. "With the environment we have been in geopolitically it's always worth having some exposure oil and gas in your portfolio." EOG Resources shares are down more than 1% in 2025. The stock pays a more than 3% dividend. Investing in defense Sheila Kahyaoglu of Jefferies said she is surprised that defense stocks haven't moved higher during the escalation of the Israel-Iran conflicts and U.S. strikes. However she said a new tailwind for the space for legacy players like RTX , Lockheed Martin and Northrop Grumman could come from Congress in the "Big Beautiful Bill," with defense spending proposed to increase by $150 billion, or roughly 13%, year over year. "If (President Trump) gets the $150 billion approved, maybe you could say it's all used in fiscal 2026, and it's clear he wants to be supportive of his 'Golden Dome' project which would literally be half of that $150 billion, $75 billion. A golden dome would be a beneficiary for existing systems because he wants to deploy it in three years," said Kahyaoglu. Two other stocks Kahyaoglu said are getting recent investor attention Israeli defense contractor Elbit Systems and Kratos Defense & Security Solutions . Investing in industrials Keith Lerner of Truist sees more upside in industrials that have been the leading sector year to date. "I think Industrials lead by defense continues to be something that will have a big," Lerner said. He added: "It is also an indirect AI play with things like cooling as an example." Lerner said FedEx earnings could have an impact on sentiment within the sector and advises investing through a diversified ETF rather than trying to find individual winners with the current trade and geopolitical uncertainty. Outlook for small caps Daniel Morris of BNP Paribas sees gains ahead the Russell 2000 . "If you increase your allocation to the S & P 500 you are implicitly betting more on that tech call," Morris said. "The appeal of small caps then becomes that you can increase your exposure to U.S. growth without increasing your exposure to megacap tech. We see it as diversified access to US growth." The Russell 2000 is more than 13% away from it's 52-week high, while the S & P 500 is 2% from a new all-time high.
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USA Today
28 minutes ago
- USA Today
Stocks usually rise by 10% a year. Those days may be over.
Americans are wise to invest in the stock market, we are told, because stocks have yielded historical gains of about 10% a year. But not, perhaps, this year. Many analysts predict that the S&P 500 index will end 2025 essentially flat, or with only meager gains. In one June 25 roundup, Yahoo Finance charts several strategists with year-end projections that put the benchmark S&P index between 5,600 and 6,100. Those figures fall below, or only slightly above, where the S&P started the year, around 5,900. Some forecasts range higher, and forecasters have been growing more bullish about American stocks in 2025. But anyone who predicts double-digit returns this year risks being branded an outlier. If big investment firms expect the stock market to finish 2025 more or less where it started, how should armchair investors react? Is the investment landscape shifting beneath our feet? First, let's explore the reasoning behind those gloomy forecasts. Stocks opened high in 2025. Maybe too high. The stock market opened strong in 2025. The broad S&P index sat near its all-time high, following two years of conspicuous growth. That growth spurt, alone, was enough to seed caution in forecasters. A surging S&P means stock prices are relatively high. Some stocks are overpriced. Bargains are fewer. The index may not have that much room to grow. 'I believe that, given the strong returns over the past two years, some lower returns are expected,' said Eric Teal, chief investment officer at Comerica Bank. Comerica's own projections call for the S&P 500 to end the year at 6,400, a number toward the high end of forecasts. Wall Street prognosticators have been bearish on stocks in 2025 because of one overarching theme: uncertainty. 'It's all the volatile actors in our current economy,' said Catherine Valega, a certified financial planner near Boston. 'It's like you don't know from one day to the next: Do we have tariffs? Do we not have tariffs?' It's hard to predict how President Trump's import taxes will affect prices, and thus, inflation. The trade war, coupled with Trump's immigration crackdown, could slow economic growth. Recession fears are heightened. The Federal Reserve may or may not ease interest rates in response. 'We're assuming that we sidestep a recession, that interest rate cuts are on the horizon, but not immediate,' Teal said, reflecting a common view on Wall Street. 'And so, there is an element of cautious optimism that I think is in the market, but a high degree of uncertainty and macro policy unknowns that will keep markets contained.' Stock forecasters don't want to be wrong There's another big reason, analysts say, why year-end forecasts for the S&P 500 are trending low: Forecasters tend to err on the conservative side. 'The analysts have historically kind of underestimated S&P 500 returns,' said Kristy Akullian, head of iShares investment strategy, Americas, at BlackRock. 'People don't want to stick their necks out with a bold prediction and be wrong.' That impulse, she said, also explains why stock forecasts tend to bunch together. No one wants to stand out. 'It's hard being an outlier,' said David Meier, a senior analyst at Motley Fool. Meier cites yet another reason why stock forecasters tend to aim low: 'Being negative, let's call it bearish, tends to get more clicks,' he said. Readers gravitate to distressing news about stocks. So, stocks are having an off year. What can I do? Now, let's move on to the practical question: If the S&P 500 might not gain much ground in 2025, what should ordinary investors do about it? The easy answer, of course, is to do nothing. Stock market projections for next month, or next year, shouldn't matter much to an investor who is in for the long haul, advisers say. And that advice applies to just about everyone: If you aren't in for the long haul, experts advise, stocks might not be for you. 'If you need funds soon, don't have it invested,' said Randy Bruns, a certified financial planner in Naperville, Illinois. 'If you don't need the funds for 15 years, stop looking at the volatility.' Market downturns tend to be brief. Recessions are shorter than they seem. Anyone who is saving for retirement, or for other long-term goals, can generally ride them out. 'If you have the luxury of being a long-term investor, be one,' Akullian said. There is, however, a longer and more nuanced answer to the question of how to respond to those conservative projections for stocks in 2025. A gloomy forecast for 2025 -- and for 2035 It involves this complicating factor: Stock market forecasts are also surprisingly conservative for 2035. Vanguard, the investment firm, predicts the U.S. stock market as a whole will rise by an underwhelming 3.8% to 5.8% a year over the next 10 years. 'Growth' stocks, the likes of Nvidia and Amazon, are projected to rise by only 2.5% to 4.5%: not much faster than inflation. Those forecasts are based on the idea that many U.S. stocks are overpriced, in essence, and trading above their real value. In Vanguard's analysis, everyday investors who want the gaudy returns they have come to expect from American growth stocks would do well to look elsewhere: Global stocks. Small-cap American stocks, in companies with a lower market value. 'Value' stocks, trading below their intrinsic worth. 'I would say it's time to have a more balanced allocation,' said Teal of Comerica. Bruns, the financial planner, suggests average investors should 'diversify across all the broad asset classes that should comprise a textbook portfolio.' That doesn't mean you should sell all of your Alphabet stocks, experts say. But the time might be right to scrutinize your portfolio. Does it include foreign stocks? Small-cap stocks? Bonds? If not, then you might consider rebalancing your portfolio to make it more diverse. 'The easiest way to do that, if you are a 401(k) contributor, is to change your future allocations,' Valega said. That way, you don't have to tinker with your current investments. Not sure how to rebalance? 'Reach out to your adviser,' Valega said. 'That's what we're there for.'
Yahoo
34 minutes ago
- Yahoo
At least 34 killed in Israeli strikes in Gaza as ceasefire prospects inch closer
At least 34 people were killed across Gaza by Israeli strikes, health staff say, as Palestinians face a growing humanitarian crisis in Gaza and ceasefire prospects inch closer. The strikes began late on Friday and continued into Saturday morning, among others killing 12 people at the Palestine Stadium in Gaza City, which was sheltering displaced people, and eight more living in apartments, according to staff at Shifa hospital where the bodies were brought. Six others were killed in southern Gaza when a strike hit their tent in Muwasi, according to the hospital. The strikes come as US President Donald Trump said there could be a ceasefire agreement within the next week. Taking questions from reporters in the Oval Office on Friday, the president said: 'We're working on Gaza and trying to get it taken care of.' An official with knowledge of the situation told The Associated Press that Israel's minister for strategic affairs, Ron Dermer, will arrive in Washington next week for talks on Gaza's ceasefire, Iran and other subjects. The official spoke on condition of anonymity because they were not authorised to speak to the media. Talks have been on and since Israel broke the latest ceasefire in March, continuing its military campaign in Gaza and furthering the dire humanitarian crisis. Some 50 hostages remain in Gaza, fewer than half of them believed to be still alive. They were among some 250 hostages taken when Hamas attacked Israel on October 7 2023, sparking the 21-month-long war. The war has killed more than 56,000 Palestinians, according to Gaza's Health Ministry, which does not distinguish between civilians and combatants. It says more than half of the dead were women and children. There is hope among hostage families that Mr Trump's involvement in securing the recent ceasefire between Israel and Iran might exert more pressure for a deal in Gaza. Israeli Prime Minister Benjamin Netanyahu is riding a wave of public support for the Iran war and its achievements, and he could feel he has more space to move toward ending the war in Gaza, something his far-right governing partners oppose. Hamas has repeatedly said it is prepared to free all the hostages in exchange for an end to the war in Gaza. Mr Netanyahu says he will end the war only once Hamas is disarmed and exiled, something the group has rejected. Meanwhile, hungry Palestinians are enduring a catastrophic situation in Gaza. After blocking all food for more than two months, Israel has allowed only a trickle of supplies into the territory since mid-May. Efforts by the United Nations to distribute the food have been plagued by armed gangs looting trucks and by crowds of desperate people offloading supplies from convoys. Palestinians have also been shot and wounded while on their way to get food at newly formed aid sites, run by the American and Israeli-backed Gaza Humanitarian Foundation, according to Gaza's health officials and witnesses. Palestinian witnesses say Israeli troops have opened fire at crowds on the roads heading toward the sites. Israel's military said it was investigating incidents in which civilians had been harmed while approaching the sites.
CNN
39 minutes ago
- CNN
Analysis: Final battle damage assessment of US strikes on Iran will be key in US push for Iran nuclear deal
As the Trump administration looks to quickly pivot from military strikes to a diplomatic deal on Iran's nuclear program, the final military and intelligence assessment on the recent US strikes will be critical in informing what the Trump administration needs to accomplish in future Iran negotiations. Trump's special envoy Steve Witkoff will need to use that final battle damage assessment – including a detailed summary of the facilities' damage and the locale of the nuclear material – to help formulate the US strategy for diplomatic efforts to completely halt the regime's ability to develop a nuclear weapon in the future, current and former US officials explained. 'You're not going to the negotiation assuming that the other side is going to tell you everything you need to know about the state of their program,' explained Pranay Vaddi, a former senior official for nonproliferation at the National Security Council. 'We need to have a baseline that is established by the US intelligence community before that,' Vaddi added. 'If the Trump administration is committed to some kind of deal still – which it makes statements on – they need to know what they were able to get through military action, compared to what they need to get through the diplomatic process.' President Donald Trump continues to claim that Iran's nuclear program has been 'fully obliterated,' which does not mirror an early assessment from the Defense Intelligence Agency, finding that the attack did not destroy the core components of the country's nuclear program. The early assessment has split lawmakers on the effectiveness of the strikes. And Trump's absolutist pronouncements could also complicate Witkoff's job, officials said. Even if the facilities themselves have been badly damaged, it does not mean that the nuclear program itself has been wholly destroyed. Prior to the US strikes, experts and former officials had expressed skepticism about the idea that the nuclear program could be militarily destroyed, noting that there would still be people with the knowledge to support it. 'The basic problem is that the equivalency between the success of the bombing and the success of ending the nuclear program is putting pressure on having this narrative that there isn't a threat,' said Beth Sanner, former deputy director for national intelligence. 'If you think that you've eliminated the nuclear program then you are not dealing with the fact that there is some residual of that program.' And while the final battle damage assessment will be important to take into account, future negotiations with Iran should prioritize getting the UN's nuclear watchdog back on the ground in Iran, said former officials who worked on previous Iran negotiations. 'I don't know that there will be any assessment that I think is fully viable until there are inspectors on the ground,' said a former senior US official who worked on past Iran negotiations. 'We must recreate the kind of intrusive verification and monitoring that was in the 2015 deal.' The International Atomic Energy Agency (IAEA) had a presence in Iran before the 2015 nuclear deal signed during the Obama administration – a deal which Trump pulled the US out of during his first term – but the presence of IAEA inspectors in the country drastically increased as a result of that deal. 'The deal meant there were inspectors on the ground 24/7, there was electronic monitoring, there was a process by which – that didn't exist anywhere else in the world – that if there was intelligence about a suspected site, if Iran, over a period of some days, couldn't satisfy the IAEA that there was a reason the IAEA could go and inspect,' the official explained, citing some benefits of the IAEA inspection efforts. But this week the Iranian parliament this week suspended its work with the IAEA, because of the 'regrettable role' played by the agency's chief Rafael Grossi, Iran's foreign minister said. Iran accused Grossi of facilitating the US and Israeli strikes in Iran, citing an IAEA report a day prior to the Israeli strike, which declared Iran was violating its nuclear non-proliferation obligations. This move follows years of Iran making moves to restrict the agency's oversight of it's program. For example, in 2022 Iran responded by removing surveillance cameras from key sites after IAEA censured Iran over uranium particles found at the undeclared sites. The steps that would need to be taken as part of any verifiable deal on Iran's nuclear program would likely include: destroying elements of the program that still exist, monitoring any further activity, blending highly enriched uranium, and declaring parts of the program that are in use. In order to prepare to take those steps, inspectors on the ground would be essential, former officials pressed. 'I think it's been a long time since the US intelligence assessments have been accepted globally as authoritative when it comes to Iran's nuclear program. They would certainly be challenged by Iran. In order to have a successful negotiation everybody needs to at least agree on the source of facts,' said Laura Holgate, the former US Ambassador to the United Nations International Organizations in Vienna. 'The IAEA will be needed to develop a new baseline of what exactly Iran has, where it is, and what its condition is in, and that's going to take time, and it will be based on Iran's cooperation,' Holgate added. With the IAEA access being diminished over the years and virtually nonexistent at this moment, the world now has large gaps in its knowledge of Iran's nuclear inventory. That is particularly true when it comes to the locale of Iran's enriched uranium. Trump administration officials have said in recent days that the stockpile was not moved ahead of the US strikes but the IAEA said Iran may have moved some of the enriched uranium out of the sites before they were attacked. Vice President JD Vance said the day after the strikes that working on what to do about that fuel would be a priority for the US. 'We're going to work in the coming weeks to ensure that we do something with that fuel. And that's one of the things that we're going to have conversations with the Iranians about,' Vance said. Republican Rep. Michael McCaul, a member of the House Foreign Affairs Committee, cited the importance of having 'a full accounting' following an all-member classified briefing on Capitol Hill earlier this week. 'There is enriched uranium in the facilities that moves around, but that was not the intent or the mission,' McCaul said. 'We need a full accounting. That's why Iran has to come to the table directly with us, so the IAEA can account for every ounce of enriched uranium that's there, I don't think it's going out of the country, I think it's at the facilities.' The final US military 'battle damage assessment could take days or even weeks to complete,' multiple sources familiar with the Pentagon's process told CNN. CIA Director John Ratcliffe on Wednesday said the agency underscored that a broad intelligence community effort is ongoing to determine the impact of the US strikes on three of the country's nuclear sites on Saturday. The Trump administration was already working on possible terms to offer Iran to bring them back to the able for nuclear deal talks before the US military strikes occurred. But if they are able to pull Iran back to the table, they will have to then enter into much more technical talks to put a legitimate and verifiable deal into place. 'I think that you want to strike while the iron is hot, to try and get them to the table while they're feeling weak,' Sanner said. 'One of the key requirements for the negotiation is setting mechanisms for cataloging Iran's residual capabilities in order to have that conversation and ultimately a deal that is worth the paper it is written on.'
