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The stock market has been buoyant since Trump won a second term on Nov. 5. But the bond market is registering concern. Since the Fed started cutting short-term rates in mid-September, long-term rates have gone the other direction, with the 10-year Treasury rising eight-tenths of a percentage point. The rates on mortgages and most consumer and business loans track the 10-year Treasury, so borrowing costs for just about everybody have been going up for the past two months.

Bond investors seem to be betting that inflation is going back up and therefore demanding a higher rate of return to lock in their money. Inflation pushes long-term rates up in two ways: If the Fed must once again start raising short-term rates to fight inflation, that can impact long-term rates. Higher rates are also a hedge against money that loses its value faster when inflation is higher.

If this all plays out, Trump could face a bracing headwind as he takes office. Consumers feel badly burned by inflation, which clearly contributed to voters’ rejection of the incumbent Democrats and Kamala Harris’s defeat in this year’s presidential election. Consumer confidence has been slowly improving as inflation has come down, but it could plunge again if people see another wave of inflation looming.

Many consumers holding out for a more affordable home or car purchase have been waiting, and hoping, for lower rates. That may not happen anytime soon, exacerbating the high cost of housing in particular. If voters transfer their inflation frustrations to Trump, he could end up just as politically weak as President Biden, whose approval rating sank as inflation set in and never recovered.

Trump has some control over the kind of economy he will preside over. He could impose tariff and deportation policies much tamer than he promised as a candidate, which might generate relief in markets, bringing inflation expectations and interest rates down. Reflation is a possibility but not a certainty.

If Trump learns anything from Biden, he’ll do just about anything to prevent it.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.

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The earnings outlook for all of 2025 has barely budged even as analysts have raised third-quarter estimates. Wall Street sees S&P 500 companies earning around $274 per share next year, slightly below projections of roughly $277 a year ago, according to data compiled by BI.

“As we approach the beginning of the new year, you tend to see a bias to more realistic expectations,” said Matt Lloyd, chief investment strategist at Advisors Asset Management. “Combined with Fed comments about not seeing a clear rate-cut path, the headwinds become more realistic.”

Since mid-October, analysts have lowered year-ahead projections by the most for energy and materials companies as crude prices slump, BI data show. Excluding energy, which skewed estimates due to lower commodity prices and ebbing inflation, S&P 500 earnings are forecast to grow by about 11% year-over-year in the third quarter.

All told, S&P 500 profit growth is forecast to climb 15% annually in 2025, up from estimates of 8% this year. The problem, though, is that the index’s earnings recession that concluded last year was long but relatively shallow, which could open the door to a smaller profit expansion than stock bulls hope in the coming years.

From peak to trough, the S&P 500 posted a 13% EPS contraction for its three-quarter earnings recession that ended last year, when viewed on a trailing 12-month basis, data compiled by BI show. That’s well short of the median 26% peak-to-trough drop since the late 1960s.

Companies will need to post sturdy profit growth and strong outlooks for next year to sustain and justify rich valuations that have propelled the S&P 500 above the 6,000 milestone in recent months. At 22 times future 12-month earnings estimates, the index’s valuation is well above its long-term average of 18.4 over the past decade.

“Fewer rate cuts might put pressure on what are otherwise lofty earnings expectations over the next several quarters,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors.

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Some investors are looking for consistently large returns quarter over quarter and only care about the GLP-1 drugs.

“No one even asks a question outside of obesity on the Lilly or Novo [earnings] conference calls. And they both have a bunch of other things going on,” Holz told Yahoo Finance.

Lilly is one of two market leaders in the space, along with Novo Nordisk (NVO), and could be the first $1 trillion healthcare company by market cap.

It’s why, despite having a diverse portfolio of products — including one of only two new Alzheimer’s drugs on the market — the weight-loss drug Zepbound and diabetes drug Mounjaro are weighing more heavily on the stock. And misses of those two products are triggering Wall Street action.

Goldman Sachs analyst Chris Shibutani believes that while Lilly may not ever reach $1 trillion, it has outperformed for two, and potentially three, years in a row despite the volatility.

“That’s also a pretty exclusive club, where a stock manages, for three years in a row, to outperform its peers,” Shibutani said.

Citi’s Meacham pointed out that some investors may only be holding Lilly and no other healthcare stocks. “The reason I think you saw such a huge move is that there are a lot of investors that … may only own one healthcare stock, and that’s Lilly,” Meacham said.

Goldman Sachs’ Shibutani similarly noted more general investors have a “FOMO” (fear of missing out) mindset impacting the stock.

He noted that there are two categories that have invoked that feeling for the past few years: artificial intelligence and obesity.

It’s “a bit of zeitgeist, sort of a cultural phenomenon,” Shibutani said.

Holz also noted that there could be more volatility ahead for GLP-1s.

“These things kind of tend to trade with a zero-sum game — rightly or wrongly,” he said.

Yahoo Finance editor Jared Blikre contributed to this report. Follow him @SPYJared.

Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee on most social media platforms @AnjKhem.

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Lesson learned: Don’t underestimate Amazon. It has incredible momentum right now, and its AI platform is the wave of the future. You can buy the stock right now at close to its cheapest valuation in a long time, and if you hold it through the inevitable short-term ups and downs to come, you should be well rewarded in the long term.

Jeremy Bowman (Ulta Beauty): Earlier this year, Berkshire Hathaway bought shares of cosmetics retailer Ulta Beauty for the first time, and in many ways, it looks like a classic Buffett stock.

Ulta is a clear leader in its niche, with more than 1,400 stores around the country — not including its roughly 800 store-in-store venues at Target locations — rivaling peer Sephora. However, the stock has pulled back this year as the company’s sales growth slowed, offering investors an opportunity to get into this longtime winner at a discount.

While Ulta’s business may be maturing, the stock still has growth potential. Interest rates are predicted to come down, which in turn is expected to improve consumer confidence — and that should help propel a rebound for Ulta and its stock. Additionally, at its recent Investor Day conference, the company revealed that it intended to accelerate the pace of new store openings, with a more ambitious long-term goal of growing its footprint to more than 1,800 stores. It’s also seeing strong adoption of its loyalty program, which it expects to reach 50 million members by 2028.

As a business, Ulta also enjoys a number of competitive advantages. Most of its full-line stores feature hair salons, which gives customers an additional reason to visit them. That’s also a service that e-commerce rivals can’t provide. Moreover, its stores are much larger than other pure-play beauty retailers — essentially, they’re superstores that carry a wide range of products and brands, making Ulta a one-stop shop for beauty shoppers.

Right now, Ulta offers investors an excellent value at a price-to-earnings ratio of 15, and the company plans to aggressively buy back stock under the new $3 billion share repurchase program it announced last month. It’s not a surprise that Berkshire Hathaway took advantage of the stock’s discount to pick up shares.

John Ballard (American Express): American Express has been a staple of Berkshire Hathaway’s portfolio for more than 30 years. Its strong growth this year speaks to why Buffett continues to hold its shares.

American Express has a solid business strategy of using cardholder perks and special offers to attract new customers who, in turn, will regularly use their cards and generate merchant fees. This spending-centric business model should continue to thrive as the economy grows over the long term.

In the third quarter, revenue hit a new high, growing 8% year-over-year, and this top-line growth also fueled strong growth in earnings. Management raised its full-year revenue and earnings guidance, and now expects 2024 earnings per share of between $13.75 to $14.05.

Buffett places a high value on the financial company’s brand. The appeal of American Express is evident from its successes in winning over younger customers. Millennial and Gen Z consumers make up the company’s fastest-growing cohorts, providing 80% of new U.S. accounts it acquired for its gold card last quarter.

American Express shares trade at a price-to-earnings ratio of about 21, which is on the high side for a financial services business, but it’s still within the stock’s historical trading range. If consumer spending picks up, it could light a fire under cardholder spending. With analysts expecting the company’s earnings to grow at an annualized rate of 15% over the next five years, investors who buy the stock now could earn excellent returns.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express. Jeremy Bowman has positions in Amazon and Target. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Target, and Ulta Beauty. The Motley Fool has a disclosure policy.

The 3 Smartest Buffett Stocks to Buy Right Now was originally published by The Motley Fool

The company pays out a little more than 50% of its cash flow via dividends. It retains the rest to fund expansion projects and maintain its financial flexibility to opportunistically repurchase shares or make acquisitions. The company currently has more than $5 billion of commercially secured expansion projects in its backlog that will come online between now and the end of 2028. That gives it lots of visibility into its future cash flow growth. Meanwhile, it sees rich opportunities to continue expanding. It should have plenty of fuel to continue boosting its high-yielding dividend in the coming years.

At its current share price, Verizon (NYSE: VZ) yields more than 6.5%. The mobile and broadband giant has increased its payouts annually for 18 straight years, the longest current streak in the U.S. telecom sector.

The company is a cash-gushing machine. It has produced a whopping $26.5 billion in cash flow from operations during the first nine months of this year, easily covering its capital spending ($12 billion) and dividend payouts ($8.4 billion). It used the excess free cash to strengthen its already solid balance sheet.

Verizon is investing heavily in expanding its 5G and fiber networks, which should increase its cash flow in the future. Meanwhile, the company recently agreed to buy Frontier Communications in a $20 billion deal to further enhance its fiber network. That acquisition will also boost its earnings, driven by at least $500 million in cost savings. The company’s growth-related investments should enable it to continue increasing its dividend.

Realty Income, Kinder Morgan, and Verizon currently offer much higher dividend yields than the average stock in the S&P 500. They also have excellent records of increasing their payouts, and they seem likely to keep their streaks going. Because of that, they are great stocks to buy for income right now.

Before you buy stock in Realty Income, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $899,361!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

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Matt DiLallo has positions in Kinder Morgan, Realty Income, and Verizon Communications. The Motley Fool has positions in and recommends Kinder Morgan and Realty Income. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.

The S&P 500’s Dividend Yield Is the Lowest It’s Been in Over 2 Decades. Here’s Where You Can Lock in Much Higher Yields. was originally published by The Motley Fool