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Hello, Reader.
As the business author Peter Drucker observed, “The only thing we know about the future is that it will be different.”
I like to keep this in mind each January when I send out my annual Fry’s Investment Report New Year’s “Forecast Issue.”
The saying continues to ring true as we hit the middle of the year… and especially as we take a look back at all that has proved “different.”
Although President Donald Trump’s unpredictability is arguably predictable at this point, it has still sent the markets on a roller coaster.
Just think about what we’ve already seen:
- The Chinese AI app DeepSeek triggered a massive selloff,
- President Trump’s Liberation Day tariffs kicked off a trade war,
- the Federal Reserve held rates steady,
- and the U.S. got pulled into the 12-day conflict between Israel and Iran.
With all this chaos, it could be easy to assume many market predictions made in January would be completely worthless by now.
But now that we’ve hit the halfway point of the year, let’s see how some of my forecasts are holding up.
Some may surprise you…
And some you still have time to get in one before the year is done.
Forecast No. 1: The Magnificent Seven Will Underperform
The Mag 7 rose significantly during the final months of 2024, but heading into 2025, I figured these richly valued stocks would lose some of their luster. My reasoning was pretty straightforward: Valuations were getting stretched, and the cost of staying ahead in AI was, and still is, getting expensive.
This turned out to be true.
The seven mega-cap companies returned an average of just 2.2% in the first half of 2025, less than half the 5.5% gain we saw in the S&P 500 index. Tesla Inc. (TSLA) got hit particularly hard, falling 21% as markets worried about its sky-high valuations (and CEO Elon Musk’s political involvement).
Coming into this year, I had a generally upbeat view on the markets; and I did think the Mag 7 would hit some bumps – which they did. But I do have to admit… I’m a bit surprised by the rebound.
They’ve remained quite strong, and we’ve had a terrific rally from the post-Liberation Day April lows. It’s been pretty volatile, but the market has been constructive for three or four months now.
Forecast No. 2: Corporate Profit Margins Will Soar
I expected companies to squeeze more profit out of their operations this year, and that’s exactly what has happened.
The S&P 500 reported 12.9% earnings growth in the first quarter – the second straight quarter of double-digit growth. Analysts are forecasting another 5% gain for the second quarter, which shows this may not be just a one-time bump.
Forecast No. 3: The Pharma Sector Will Outperform the S&P 500
This one didn’t go as planned.
Even though the healthcare sector saw a massive 43% surge in earnings, investors got spooked by meddling regulators. The pharma industry, as measured by the iShares U.S. Pharmaceuticals ETF (IHE), ended up flat for the first half of the year.
Sometimes great fundamentals aren’t enough if investors are worried about government interference.
Forecast No. 4: Natural Gas Will Outperform the S&P 500
This one is mostly working out.
Gas prices are up 19% this year on a seasonally adjusted basis, and funds like the United States 12 Month Natural Gas Fund (UNL) have gained 6.6%. But keep in mind that non-adjusted prices are actually lower during summer months, so I’ll need to wait until December to really claim victory on this forecast.
Forecast No. 5: Select Foreign Markets Will Outperform the S&P 500
This one’s been spot-on.
The iShares MSCI ex-U.S. ETF (ACWX) has surged 17% as investors worried about America’s ongoing trade wars. And smaller funds focused on Poland, Italy, and Austria have done even better.
In fact, one of my international stock recommendations in the Fry’s Investment Report portfolio is up nearly 100% in only three months. You can learn how to access the details of this stock by clicking here.
The outperformance of foreign stocks was especially noticeable earlier in the year. And right now, just about everything is going up.
Foreign markets caught two nice breaks:
- The U.S. dollar has been weak (down about 10% this year).
- These markets were trading at much lower valuations compared to U.S. stocks.
The dollar may stabilize a bit from here, but those low valuations and the broad growth we’re seeing overseas should keep pushing foreign stocks higher. They haven’t been outperforming lately, but I’m expecting that to change as we move through the rest of this year and into 2026.
The fundamentals are still there – attractive prices and solid growth potential.
You can follow along with my foreign market picks along with my Fry’s Investment Report subscribers. Learn how here.
And now, let’s take a look back at what we covered here at Smart Money over the past week…
Smart Money Roundup
July 9, 2025
China’s Shrinking Workforce = Your Biggest AI Opportunity Yet
While headlines stay fixated on chatbots and software, a deeper AI transformation is happening right now: Robots that learn and operate independently are on the rise. And China’s shrinking workforce is driving this megatrend.
Indeed, in that problem lies one of the most explosive investing opportunities we’ve seen in decades. My InvestorPlace colleague Louis Navellier shares how this demographic crisis is triggering a full-scale robotics revolution… why the U.S. is poised to respond in kind… and how a handful of under-the-radar companies could be the biggest beneficiaries of what’s next.
July 10, 2025
Copper at $5.50 Could Signal the Start of an AI Metals Explosion
During the 1980s, traders used “Dr. Copper” to measure the health of the economy. The higher the metal’s price, the rosier the outlook. Now, Dr. Copper is making a new prediction. It’s one that spells great news for the $1 trillion AI industry… and especially a small subsector you don’t want to miss.
July 12, 2025
Ride the AI Wave With Two Long-Term Leaders
While there is no perfect investment method, there is a way to allocate your assets intelligently. This will then help you set yourself up for the best chance at success. Now, there are multiple facets to this strategy, but the one I want to focus on today is stocks to buy and hold forever. So, I’m sharing two stocks that I consider to be some of the best “Forever Stocks” out there.
Sticking to Our Strategy
Although this has quite the chaotic and unpredictable year, I hit the mark on four out of my five predictions (with natural gas still in play).
Here’s why: Overvalued companies are falling back to Earth, while undervalued ones are surging ahead.
This is the basis of how I choose companies to invest in. At Fry’s Investment Report, we’re looking for companies that have a promising runway built on strong fundamentals and attractive valuations.
If you’re interested in learning more about the undervalued opportunities I’ve recommended – and to find out how my forecasts play out by the end of the year – click here for more on how to join Fry’s Investment Report.
The bottom line: While we can make educated guesses based on what we know about valuations and market trends, the future always finds a way to surprise us.
The trick is staying flexible and rolling with the punches.
Regards,
Eric Fry
P.S. President Trump’s Executive Order #14179 sets up a major policy move on July 22, which Louis Navellier believes will ignite a massive second wave of AI-related profits….
But not in typical AI stocks.
Instead, the biggest gains will likely come from a forgotten subsector of the market.
Louis has pulled back the curtain on these “pocket change” stocks that will lead the next phase of the AI boom. Click here to get all of the details.