Today’s issue in preview:
- Rising defense spending is driving a big bull market in these stocks. Are you benefiting?
- The oil sector is generating wealth at an incredible rate. Why this trend will continue.
- It’s official: The housing rally is on.
- Our extraordinary track record gets even better. The Boomer health care, nuclear power, smart factory, and pipeline themes soar to new highs.
Rising defense spending is driving a big bull market in these stocks. Are you benefiting?
Credit: onurdongel
Last Friday, Lockheed Martin (LMT) – one of the world’s largest defense companies – climbed 2.38% to reach a new all-time high. That’s good news for anyone who followed our recommendation to invest in the defense spending megatrend.
According to the Stockholm International Peace Research Institute (SIPRI), global military expenditures reached $2.7 trillion in 2024 – a 9.4% increase over 2023, the highest year-on-year rise in decades.
Defense spending is booming for several reasons. The U.S. and China are in a “great power” competition for power and influence. Donald Trump is forcing Europe to spend more of its own money on defense. Plus, the rate of technological progress is so fast that today’s cutting-edge weapons systems are quickly outmatched by tomorrow’s, forcing governments to spend more to keep up
The increased spending is driving windfalls across the aerospace and defense industry. In January, many of the major defense firms reported outstanding Q4 2025 results.
Given the strong fundamental tailwinds, it’s no wonder Lockheed reached a new high last week. It’s no wonder the biggest aerospace and defense ETF – the iShares U.S. Aerospace & Defense ETF (ITA) is in a long-term uptrend and close to reaching a new all-time high. The European-flavored aerospace and defense fund – the Select STOXX Europe Aerospace & Defense ETF (EUAD) – is also trending higher.
I’d rather see defense stocks in a bear market. But I don’t make the rules; I look for strong trends. As you can see in the chart below, we have one in defense:
The oil sector is generating wealth at an incredible rate. Why this trend will continue.
Credit: very good
Last week, the quiet rally in oil stocks got a little louder… and a lot more profitable.
On September 29, we highlighted the emerging leadership of oil and gas stocks and stated it’s time to be long this sector.
The bull case for oil stocks is simple. If the global economy is growing, oil demand will remain solid. However, importantly, U.S. shale oil production growth appears to be peaking. This would remove a critical and reliable source of production growth that has been in place for over a decade. Plus, oil is very cheap relative to gold and other assets, indicating good value in oil.
That’s the bullish forecast, but regular readers know we care a lot more about what the market thinks of fundamentals than the fundamentals themselves. You can believe in a bullish market forecast until you’re blue in the face, but if that market is moving lower, then your forecast isn’t worth much.
In the case of oil stocks, the market likes the bull case. Over the past month, the S&P Oil & Gas Equipment & Services ETF (XES) has climbed a huge 20.94%. This makes it the second-best performing ETF over the lat 30 days on our Global Trend Tracker. It’s up 47% since our call (an annualized rate of 121%).
Plus, many individual oil producers recently powered to new highs, including ConocoPhillips (COP), Suncor (SU), Permian Resources (PR), and Cenovus Energy (CVE).
Despite the oil industry’s terrific performance, the average investor is indifferent towards it. It’s still unloved and cheap. This tells me there’s a good amount of upside ahead. And importantly, you can stub your toe on a barrel of oil or a stack of drill pipe.
It’s official. The Housing Market is recovering.
Credit: Carlo Franco
It’s official. I nailed the Housing Rebound trade.
It’s a bull market in building, equipping, and furnishing homes.
Back in November 2025 (and again in January), I looked at the beaten-up housing sector and figured it was due for a strong rebound in 2026.
In 2025, most housing-related stocks badly lagged the broad market. Some were down more than 25%. This underperformance was driven by unaffordability and homeowners’ reluctance to move and surrender their low mortgage rates.
Stocks such as Trex (TREX, decking), Whirlpool (WHR, appliances), Lennox (LII, HVAC), and American Woodmark (AMDW, cabinets) all declined in 2025. The S&P Homebuilders ETF (XHB) was one of the worst-performing funds in 2025.
Home affordability has become a major issue in U.S. politics. A large percentage of young voters can’t afford homes and are upset about it. Home affordability metrics are at all-time extremes, to the negative side.
Trump & Friends know this trend could cost them elections, so they are making significant efforts to improve the situation, which would be positive for the housing trade.
Since my original call, the housing sector has enjoyed a strong rally driven by the prospect of lower interest rates. Home improvement giant Lowe’s (LOW) has rallied to a new one-year high. Homebuilders Toll Brothers (TOL) and PulteGroup (PHM) have rallied to new one-year highs. Heating and cooling giant Lennox (LII) has rallied to a multi-month new high. The S&P Homebuilders ETF (XHB) has broken out to new one-year highs.
Trends in the stock market tend to persist, so I expect this new housing rebound trade to continue running.
Also, keep in mind that the stock market is the world’s greatest forecasting mechanism. It tends to look ahead 6 -12 months. When an industry is in a recession, its stock prices will rise before the news media announces it is recovering. When an industry seems to be doing well, its stock prices will decline before the news covers its downturn. This is often called “discounting” or “pricing in” the future.
The strong performance of housing stocks tells us to expect to read about an improving housing market in the coming months. Don’t say the market didn’t warn you.
Market Notes
- Our longstanding recommendation to invest in Boomer health care continues to pay off. Drug giants Merck (MRK), Pfizer (PFE), and Novartis (NVS) recently reached all-time highs.
- Our recommendation to own pipeline stocks is proving to be a big winner. Big pipeline operators Enbridge (ENB), Enterprise Products (EPD), and Kinder Morgan (KMI) just hit all-time highs.
- Our recommendation to invest in the automated factory boom is a winner. The ProShares S&P Kensho Smart Factories ETF (MAKX) just reached a new all-time high.
- The AI Lawnmower continues to cut down prominent companies in the KIDS category. Software giants Intuit (INTU), Workday (WDAY), Atlassian (TEAM),and Trade Desk (TTD) reached new one-year lows today. Hiring/consulting firm Robert Half (RHI) reached a new one-year low today. Website hosting/registrar firm GoDaddy (GDDY) reached a new one-year low today. Financial data giant Factset (FDS)reached a 5-year low today.
- Our recommendation to invest in the Nuclear Power Renaissance theme continues to pay off. Nuclear power giant Exelon (EXC) recently soared to an all-time high after reporting strong earnings.
Regards,
Brian Hunt
Editor, Money & Megatrends
