1) In yesterday's e-mail, I wrote about the ceasefire deal in the Middle East and concluded:
I think this will play out similarly to what happened a year ago when Trump announced his "Liberation Day" tariff plan. After stocks plunged, Trump backed away from a trade war and stocks rallied strongly for more than six months.
In his latest Week in Charts, Charlie Bilello shares some interesting data that reinforce my view...
Exactly one year ago yesterday, the S&P 500 Index concluded its 12th-worst four-day decline since 1950, crashing 12.1%.
In the 14 similar cases Bilello tracked, the S&P 500 generated double-digit returns over the next one, three, and five years. And nine cases generated triple-digit five-year returns.
Sure enough, the S&P 500 is up a fantastic 38% over the past year:
Bilello also tracked the 75 times that the CBOE Volatility Index ("VIX"), known as the market's fear gauge, closed above 50 – indicating extreme fear.
Again, there wasn't a single instance in which the market wasn't up substantially in the following one to five years:
So where are we today?
The VIX's closing high this year was around 31 on March 27. This would have been a great day to buy, as the S&P 500 is up 6.5% since then, recouping nearly all of this year's losses.
As you can see in this five-year chart of the VIX from Bilello, while 31 isn't an extreme reading, it's in the top 10% historically:
When the VIX is this high, the market has done well in the subsequent one to five years, dating back to 1990, as this chart from Bilello shows:
Finally, Bilello shares one more piece of historical data: The S&P 500's 7.3% decline in the first 60 trading days of this year was the 12th worst in history, dating back to 1928.
But in eight of the 11 worst starts, the market was up the rest of the year – and by 25% or more in seven cases:
Overall, this historical data reinforces my view that stocks are likely to do reasonably well over the next year.
2) A week from today will be the seventh anniversary of the launch of my former newsletter, Empire Investment Report, at my old firm Empire Financial Research.
In the inaugural issue – and ever since – I pounded the table on my "Big Four" stocks: Berkshire Hathaway (BRK-B), Amazon (AMZN), Alphabet (GOOGL), and Meta Platforms (META).
Since then, through yesterday's close, they're up an average of 230% – far above the S&P 500's already outstanding 137% return:
But readers who've been following me since then have done much better. That's because at different times, I've named each of these stocks as my No. 1 favorite.
As I wrote on January 7, when I named My Favorite Stocks for 2026:
Among the big three tech stocks, Meta was my favorite starting from October 31, 2022, when I pounded the table on the stock in six consecutive e-mails through November 7. That's when it was around $90 per share...
It remained my favorite through 2023 and 2024 as it soared more than 500%.
Then, roughly a year ago, I named Alphabet as my new favorite among the three. It was a great call, as the stock rose 65% last year.
That day, I named Amazon as my favorite out of the big three tech stocks. Since then, Amazon's stock is down 8%, which makes me like it even more.
And my conviction is even higher after reading CEO Andy Jassy's annual letter today. I was particularly interested to read about Amazon's investment in robotics, which I believe will increase efficiencies and margins:
While we continue to work on productivity and inventory levels, robotics provides a step-level change for how we can deliver faster, reduce the cost of carrying more selection, and automate movements that cause strains and injuries to our teammates. Accelerated by acquiring Kiva in 2012, and investing in numerous robotics initiatives the last 14 years, we now have over one million robots operating in fulfillment centers... While the above progress is substantial, we're still in the early stages of how we'll leverage robotics.
Amazon also has its own satellite network that it's now commercializing, Amazon Leo. It has put more than 200 satellites into space, with thousands more to come in the near future:
While Amazon Leo is officially scheduled to launch in mid-2026, we already have meaningful revenue commitments from enterprises and governments. Most recently, Delta Airlines, the highest grossing airline in the world, has announced it's chosen Amazon Leo for its future Wi-Fi, and will begin with 500 planes in 2028. They join other Leo customers like JetBlue, AT&T, Vodafone, DIRECTV Latin America, Australia's National Broadband Network, NASA, and others.
Lastly, Jassy makes the case for Amazon's massive investment in AI. This is the bulk of the estimated $200 billion the company will spend on capital expenditures ("capex") this year, up from $132 billion last year. Investors' concerns about such a huge number are weighing on the stock.
Jassy notes, "We have never seen a technology more quickly adopted than AI," comparing it with electricity. But he says, "The difference is that electricity took 40 years to get where it was going. AI appears to be moving 10 times faster."
He then shares some statistics on how Amazon Web Services ("AWS") is capitalizing on AI:
Amazon is smack in the middle of this land rush, and companies are choosing AWS for AI. Three years after AWS launched commercially, it had a $58 million revenue run rate. Three years into this AI wave, AWS's AI revenue run rate is over $15 billion in [first-quarter] 2026 (nearly 260 times larger than AWS at that same point) – and ascending rapidly.
The thing that most caught my attention in Jassy's letter is his description of Amazon's chips business:
Our annual revenue run rate for our chips business... is now over $20 billion, and growing triple digit percentages [year over year]... If our chips business was a stand-alone business, and sold chips produced this year to AWS and other third parties (as other leading chips companies do), our annual run rate would be [around] $50 billion. There's so much demand for our chips that it's quite possible we'll sell racks of them to third parties in the future.
To put this in perspective, Nvidia (NVDA) trades at 20 times forward earnings. If we apply that multiple to Amazon's $50 billion of run-rate chip revenue, that's $1 trillion of value.
As Jassy concludes in this section, Amazon isn't investing this huge amount of capex and making commitments on a "hunch." He says:
We are willing to make large capex investments and endure short-term FCF [free cash flow] headwinds for the substantial medium to long-term FCF surplus. AI is a once-in-a-lifetime opportunity where the current growth is unprecedented and the future growth even bigger. AWS has a significant leadership position with the broadest functionality, strongest security and operational performance, largest share of customers and revenue, strong desire from customers to run their AI in AWS, and an opportunity to build what could be a new pillar for Amazon in chips. We're not going to be conservative in how we play this – we're investing to be the meaningful leader, and our future business, operating income, and FCF will be much larger because of it.
Needless to say, Amazon remains at the top of my list of favorite stocks.
3) This New York Times article shares another sad story of an elderly person who got scammed:
David Welles, a retired lawyer, had been struggling with his new iPad for hours when he tried to call tech support.
But instead of dialing Microsoft to help him connect his email, the phone number he found on Google put him in touch with cybercriminals.
The smooth talking scammer who answered called himself Alex and built a rapport with Mr. Welles, assuring him that he could resolve his tech headaches. Before too long, Mr. Welles downloaded remote access software, both on his iPhone and his laptop, allowing the scammer to burrow deep inside of his devices, where he stored his username and passwords on his hard drive.
The unfortunate tale ended with the criminal taking $85,000 from the victim's bank account.
Be careful out there!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.