These 2 Indicators Are Tricking Investors And Costing Them A Fortune
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Most indicators are misleading investors right now, with some looking rosy and others seemingly saying it's time to panic.
So today we're going to parse through the noise and look at what's really going on under the hood of the US economy.
Then I'm going to give you our latest 'CEF Insider intel' on what to do with stocks—and funds (specifically closed-end funds) that hold them. We're also going to dig into one bond fund yielding an outsized 13% that's set to benefit as uncertainty grows.
Consider the CNN Fear & Greed index, a closely watched sentiment indicator. As I write this, it's showing a five-alarm fire.
Fear & Greed Index
Meantime, let's look at the VIX, the market's so-called 'fear gauge.' You'd think that with the S&P 500 just closing out its worst quarter since 2022, the VIX would be spiking. Instead, crickets.
VIX Quiet
The VIX, which measures stock volatility, is at 22.3 as I write this—somewhat high territory compared to the last decade, but still pretty low in light of the worry the market has experienced going into April 2 tariff announcements. But in really moody times, this indicator rises to over 25, which it did several times in—you guessed it—2022.
I'm guessing that if you're reading this, you may also be thinking of 2022 right now, since that year also saw fears of inflation and a stagnant economy that caused markets to sell off.
So today we're going to drill into that and look at two reasons why, no, 2025 is not 2022 all over again. We'll do it by looking at both inflation and stagnation to see if, in fact, either (or both!) are reasons for investors to worry.
(Sneak preview: The answer is no—but we do need to be more selective and look at areas beyond stocks, like corporate bonds, including the bond fund we'll talk about below.)
I dislike pointing this out, because I almost always get comments from readers who (rightly!) tell me that prices keep going up in supermarkets and elsewhere. But, well …
Inflation, on a year-over-year basis, remains below 3%, according to the consumer price index (CPI). That's far from the alarming levels we saw in 2022. To be sure, prices are still going up: And as upsetting as that's been for consumers, the important point for the stock market is the question of how much.
We can consider the current rise of 3% year-over-year to be a safe zone. And if you look at the right side of the chart above, you can see that since inflation fell off a cliff in early 2023, it has been slowly (but inconsistently) creeping closer to 2%.
The verdict here is clear: Inflation is not trending back to the eye-watering levels we saw in 2022. Yes, we do need to keep an eye on this, but it isn't reason to panic. But what about the economy as a whole?
Earnings Growth Paths
BlackRock Global Chief Investment Strategist Wei Li pointed to this chart recently when she said in a recent LinkedIn post that corporate earnings are rising 'still above the historical trend of 6% to 7%.' In other words, companies are not only growing profits, but they are doing so at a stronger rate than they tend to, on average.
It's also worth noting that the S&P 500 saw earnings rise 17.8% in the fourth quarter of 2024, the fastest pace since the fourth quarter of 2021, when companies were comparing themselves against the economic shutdowns of 2020. That gives them some additional resilience in the face of tariffs and other unpredictable changes.
Investors are totally ignoring that earnings number, as well as the fact that 77% of S&P 500 companies exceeded EPS estimates when they reported earnings in the last quarter. That earnings growth is accompanied by 4.2% revenue growth at the start of 2025 and 2.8% spending growth by consumers after we take inflation into account.
I know this is a lot to take in, but the takeaway is that the average American is spending more not just because prices are going up, but because they're buying more goods and services.
Companies, in turn, are taking in more revenue and expanding profit margins. And they're making their operations more efficient, in turn causing their earnings to rise, too.
All of this is good news for investors. So the recent market price decline is a buying opportunity.
My beat, of course, is CEFs—often-ignored funds that yield around 8% on average. So let me talk about what all this means for our CEF strategy. The short answer is that we need to be very selective in this environment—and target other corners of the CEF market beyond those funds that hold stocks.
In 2025, we've seen CEFs hold their own for the most part, with average discounts to net asset value (NAV) for all CEFs around 5%, with stock funds at 6.2%. That might sound generous, but discounts were more like 8.5% in 2022, so this tells us there are fewer CEFs that are generously discounted.
This is why we've been holding off on adding more equity CEFs to our portfolio this year, choosing to focus instead on corporate-bond CEFs. As I write this, we have just two tickers in our equity-CEF bucket.
And we continue to like bond funds—especially those whose managers have been able to buy higher-yielding bonds with long durations. Those bonds are especially well-positioned as interest rates fall (something I see happening as the economy slows, which I expect as we move into the second half of 2025).
Case in point: the Nuveen Core Plus Impact Fund (NPCT), a 13%-yielder trading at a 7% discount to NAV today. As I write this, it holds 132 bonds with an average leverage-adjusted effective duration (which measures how much a bond is likely to go up or down in value in relation to interest rates) of 8.7 years.
That means NPCT will be able to bring in its bonds' income streams for nearly a decade. And those bonds' value will only increase as rates decline. The fact that we can pick this one up at a 7% discount to the value of the bonds it holds is a nice bonus and suggests more price upside ahead.
Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 8.6% Dividends.'
Disclosure: none
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Opinion - Fix the wealth gap by changing the corporate tax code
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They sit — often offshore and untaxed — fueling stock buybacks or simply increasing book value. Meanwhile, shareholders can borrow against those unrealized gains, grow richer by the year and legally avoid income tax altogether. Under the current system, corporations face a 21 percent statutory income tax rate. But due to loopholes and global tax arbitrage, the effective rate is often much lower — closer to between 9 percent and 15 percent. At the same time, the top 1 percent of Americans own more than 90 percent of stocks and mutual fund wealth, much of which compounds through retained earnings without triggering taxable events. A 20 percent flat tax on retained earnings, applied at the corporate level, would be lower than the statutory income tax but much harder to evade. It would simplify the tax code, eliminate gamesmanship and ensure that profits benefit society, whether distributed or not. Companies could avoid the tax by issuing dividends — thereby transferring the tax burden to shareholders, who would then pay ordinary dividend taxes. Or companies could reinvest in productive capital expenditures or research and development, which could be exempted from the tax base. People often complain that the rich don't pay their fair share in taxes. A retained earnings tax addresses this directly, since the wealthy are by far the largest shareholders. By inducing higher dividend payouts, the tax would convert more untaxed wealth into taxable income — ensuring the rich pay more, proportionally and predictably. This plan is fair. Wealth would no longer accumulate tax-free inside corporations. Ultra-wealthy shareholders would see more of their income flow to dividends, triggering taxes like ordinary Americans face on wages. In 2024, S&P 500 companies earned approximately $1.9 trillion in pre-tax profits. Of that, they paid only about $248 billion in corporate taxes — just 13 percent of total profits — and distributed around $650 billion in dividends to shareholders. That left well over $1 trillion in earnings to be retained or used for stock buybacks. A 20 percent tax on just the retained portion — estimated near $870 billion — would yield $174 billion annually. More importantly, it would encourage companies to issue more dividends — triggering personal income tax obligations at rates of 15 percent to 23.8 percent. For the first time in decades, untaxed paper wealth held by the ultra-rich would convert into real, taxable income. This plan is earnings are already reported as a line item on corporate financial statements, so no need for armies of tax accountants. This plan also encourages efficiency. Corporations would be nudged to either distribute profits or reinvest productively — reducing hoarding, stock buybacks and financial manipulation. The scale of profit hoarding is not theoretical. As of late 2024, Apple held over $65 billion in cash and equivalents. Microsoft held more than $71 billion. Alphabet, parent company of Google, sat on over $95 billion and Amazon was at $100 billion. These figures represent retained capital sitting in balance sheets — largely untouched by taxation. In many cases, this hoarded cash fuels share repurchases or simply adds to paper valuations, thus benefiting the wealthiest shareholders while contributing nothing to public coffers. Of course, this idea has precedents. President Franklin D. Roosevelt experimented with an undistributed profits tax in the 1930s. Today, a version survives as the Accumulated Earnings Tax, but it's rarely enforced and easy to circumvent. This proposal is simpler, bolder and broader. Critics may worry this plan would discourage reinvestment or burden growth. But a well-designed system can exempt reinvested earnings tied to clear capital investment or innovation. What this proposal targets is not growth but excessive hoarding of profits that serves only the wealthy few. Others may fear that such a tax would prompt corporations to switch to alternative structures or shift operations abroad. But a retained earnings tax can be applied based on financial disclosures for U.S.-based public companies and expanded to large LLCs or partnerships. In fact, it may reduce incentives to move profits offshore, since it targets where wealth stays, not where it's reported. The politics are promising. A retained earnings tax is lower than the current corporate income tax — yet may raise more consistent, sustainable revenue. It eliminates the need to police every deduction, credit and carve-out. It also aligns with populist sentiments on both the left and right: no more tax-free stockpiling, no more billionaires (referred to by some today as 'oligarchs') borrowing off their gains while avoiding taxes. Congress has a chance to reset how we think about taxing wealth — not by chasing every dollar of income, but by targeting the retained profits that silently fuel inequality and sidestep the tax system. Fixing the corporate tax code is essential not just for raising revenue but for restoring fairness, transparency and trust in the American economic compact. Peter D. Wells is principal at Ancient Wisdom Consulting. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
