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| Inflation Protection Model Portfolio |
| Monthly Portfolio Review: June 2025Publication date: July 2, 2025 |
| | | Current portfolio holdings |
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| | FOR SUBSCRIBER USE ONLY. DO NOT FORWARD OR SHARE. |
| | | Major stock indices set all-time highs by the end of June, powered by a technology-driven recovery from April lows. The Inflation Protection portfolio was modestly positive this month. On a year to date basis, the portfolio has returned 7.1%, versus 6.2% for the S&P 500 Index. The top performing stocks in the portfolio this month were Freeport-McMoRan (FCX), WESCO International (WCC), and Permian Resources (PR). The worst performing stock was Brown-Forman (BF), which has struggled with weak liquor demand and retaliatory tariffs. We have replaced BF with Mid-America Apartment Communities (MAA), which we believe now offers a superior risk/reward profile and represents a better inflation hedge. The portfolio’s gold plays were generally flat this month as the gold price has stabilized following a very strong start to the year. We continue to view commodities and other real assets as long-term beneficiaries of a highly indebted U.S. government that has basically no choice but to pursue inflationary growth policies.
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| | | The Inflation Protection portfolio returned 0.7% in June, versus a total return of 5.1% for the S&P 500 Index. On a year to date basis through the end of June, the portfolio has delivered a total return of 7.1%, outpacing the 6.2% return of the S&P 500.
The portfolio’s top performing stocks in June were Freeport McMoRan (FCX), which returned 13%; Wesco International (WCC), which returned 11%; and Permian Resources (PR), which returned 9%.
The worst performing stocks were Brown-Forman (BF), which returned -19%; Costco (COST), which returned -5%; and Franco-Nevada (FNV), which returned -3%. |
| Back to All-time Highs
After a record-setting performance in May, stock market momentum continued through June. The S&P 500 and NASDAQ Composite both ended the first half of 2025 at their all-time highest levels, surpassing previous peaks reached in mid-February. |
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| S&P 500 and NASDAQ CompositeTotal Return (12/31/24 - 6/30/24) |
| The strong performance of stocks in June is especially remarkable given the major geopolitical news of the month.
On Saturday, June 21, the United States sent a squadron of B-2 bombers into Iranian territory in an effort to eliminate, or at least severely damage, Iran’s nuclear program.
Prior to Operation Midnight Hammer, there was a great deal of hand-wringing over potential U.S. involvement in Israel’s military actions against Iran. Many observers believed it would be catastrophic, potentially even setting the stage for World War III.
Crude oil prices, which in May and April had reached their lowest levels since early 2021, began to rise sharply in June as tensions with Iran escalated.
Oil investors were primarily concerned about potential supply disruptions, which may have even included Iran taking steps to obstruct traffic through the Strait of Hormuz.
Return of the superpower
It has been less than two weeks since President Trump authorized the mission, but as we conveyed last week, the maneuver already appears to have been a military, foreign policy and even economic masterstroke.
Notwithstanding some conflicting early reporting, severe damage has clearly been done to Iran’s nuclear program.
We did see a feeble and performative counterstrike on the American military base in Qatar. The Iranians provided the U.S. with ample advance notice to ensure that the base could be evacuated and their handful of missiles would be shot down.
Shortly thereafter, Iran agreed to a ceasefire with Israel and to pursue a diplomatic course of action with the United States. The regime will survive but will not be permitted to advance its nuclear program.
Instead of triggering a geopolitical crisis, the surgical strike on three major nuclear facilities has, at least in the short-run, led to geopolitical stability and improved market sentiment.
In addition to stock prices advancing since the strike, oil prices have retreated as the perceived odds of a supply shock scenario have been drastically reduced. |
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| Crude oil - $/barrel(Year to date) |
| We have always viewed Trump as the type of politician who likes to have his cake and eat it too. With his handling of the Iranian problem, he may have accomplished just that.
Trump has consistently said that Iran must not acquire a nuclear weapon. But he also strongly opposes open-ended U.S. involvement in Middle Eastern wars.
The precision strike on the Iranian facilities severely disabled the Iranian nuclear program, but Trump also provided the regime an immediate diplomatic off-ramp. In doing so, he appears to have accomplished his main objective at essentially no cost to the United States in terms of blood or treasure.
And instead of international chaos, the nations of the world now seem to look upon the U.S. with more respect and willingness to cooperate.
Diplomatic successes
Immediately following the successful military operation in Iran, the U.S. showed progress on many important fronts in its ongoing negotiations with other countries across a range of issues.
We did not see a deterioration in relations with America’s geopolitical rivals as many had predicted.
Instead, markets took comfort in reports that China will once again allow the sale of magnets and rare earth minerals (crucial commodities used by American semiconductor manufacturers) as a new trade framework is hammered out between U.S. and Chinese diplomats.
Meanwhile, at the NATO Summit in The Hague a few days after the raid, European countries agreed to boost their financial contribution to NATO to 5% of GDP by 2035. NATO Secretary General Mark Rutte jokingly referred to Trump as “daddy” for his successful settling of the Iran-Israel conflict.
In another sign of rising U.S. prestige, on June 30, Canada suspended its 3% Digital Services Tax, which targeted leading American tech companies, after Trump temporarily halted trade talks.
Operation Midnight Hammer and the diplomacy that followed it displayed a combination of technological supremacy, moral clarity and strategic restraint that has left governments around the world, as well as investors, more confident in U.S. leadership.
Declining interest rates
The outlook for interest rates also improved in June.
Part of this had to do with declining oil prices in the aftermath of the Iran strike. Lower energy prices contribute to lower future inflation, giving the Fed more scope to cut rates going forward.
Yields on 10-Year Treasuries ended the month around 4.25%, close to their lowest levels of the year (excluding the post-Liberation Day panic when investors, fearing economic collapse, charged into Treasuries and pushed yields close to 4% for a few days).
Lower long-term interest rates are helpful for stock prices as it means borrowing costs will be lower and there will be greater liquidity in the system. |
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| 10-Year Treasury Yields(Last 12 Months) |
| Tech rebound continues
The technology sector led the way again in June. Tech stocks, as measured by the Technology Select SPDR ETF (XLK), which tracks the tech names of the S&P 500, advanced 10%. XLK was up 10% last month as well.
The tech sector has driven the recovery in stocks since markets bottomed on April 8, 2025, just prior to the tariff pause.
XLK returned 41% from 4/8/25 through 6/30/25. This compares to a total return of 25% for the broader S&P 500, which itself has more than 30% exposure to tech, which is its largest sector exposure. |
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| Tech stocks (XLK) vs. S&P 500 (SPY)(4/8/2025 - 6/30/2025) |
| Given its high exposure within the index, tech drove the majority of the upside in the S&P 500 in June. Other sectors performed reasonably well but delivered more modest returns.
Consumer staples stocks were slightly negative for the month, as investors favored growth over defensive stocks. |
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| | Enthusiasm around technology, especially artificial intelligence, drove stocks to new heights in early 2025. Part of this was optimism that the new administration would be highly supportive of the sector from a policy perspective.
Momentum started to break down in February, first in response to anxiety around China’s DeepSeek AI initiative (which seems to have almost entirely faded as a concern) and later with tariffs and worries over a severe rupture in trade with China.
But AI has proven very resilient as an investment theme.
AI bellwether NVIDIA (NVDA) reached a new all-time high in June. NVDA is once again the most valuable stock in the world, recently surpassing Microsoft (MSFT), after reporting an impressive growth outlook at the very end of May.
NVDA shares are up more than 60% since reaching their lowest levels of the year in early April.
What about the dollar?
With stocks setting all-time highs, energy prices low, inflation subsiding, interest rates trending down, peace and stability in the Middle East, and amazing technological breakthroughs seeming to occur on a daily basis, critics of the Trump administration appear to be running short of talking points.
Nonetheless, The New York Times gave it their best shot on June 30, focusing on recent weakness in the U.S. dollar relative to other currencies.
In The Dollar Has Its Worst Start to a Year Since 1973, columnist Joe Rennison pours cold water on the recent recovery of stocks and attempts to depict a faltering U.S. economy on the precipice of collapse. |
| | The United States’ currency has weakened more than 10 percent over the past six months when compared with a basket of currencies from the country’s major trading partners. The last time the dollar weakened so much at the start of the year was 1973, after the United States had made a seismic shift that had ended the linking of the dollar to the price of gold…. This time the seismic event is President Trump’s efforts to remake the world order with an aggressive tariff push and a more isolationist foreign policy. - The New York Times (6/30/2025) |
| | One of the challenges of being an investor with Donald Trump in the White House are the persistent attempts by the financial media, which is for the most part ideologically opposed to Trump, to spin political, economic and market events in a severely negative way.
This can have real consequences and lead to breakdowns in market confidence, as we observed in early April on the subject of tariffs. Investors who got drawn into the media-driven panic over tariffs and sold down their stock holdings missed out on substantial subsequent gains.
It is true the the U.S. dollar has declined on a year to date basis, but it is important to put this move in a larger context.
Members of the administration have indicated at multiple times that they seek a weaker dollar relative to other major currencies as part of the broader effort to rebalance global trade.
The U.S. runs very high trade deficits with the rest of the world. If the dollar is too strong, foreign firms are advantaged over American businesses. The U.S. exports less and imports more.
The Dollar Index, which was the focus of The New York Times article, measures the value of the U.S. dollar relative to a basket of foreign currencies.
The Euro represents the largest constituent of the Dollar Index with a 58% weighting. The Japanese Yen, British Pound and Canadian Dollar are assigned a 14%, 12% and 9% weighting respectively.
The Dollar Index declined significantly in the first half of 2025. But much of this merely reversed the rally in the dollar that took place in anticipation of Trump’s election and in the months that followed.
In the nine month period from September 30, 2024 through June 30, 2025, the Dollar Index only declined by 3.9%. |
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| The Dollar Index(Last 10 Years) |
| Looking at the Dollar Index over the past 10 years, one observes that the only time the dollar was as strong as it was at the beginning of 2025 was a very brief period in late 2022.
Back then, the Fed had just started hiking interest rates, and foreign capital was quickly repositioning towards U.S. bonds.
Over the last decade, the Dollar Index has for the most part fluctuated between 90 and 110. Now at 97, it is close to the midpoint of this historical range.
While the folks at The New York Times may be deeply troubled by the move in exchange rates, from our perspective, there is nothing alarming at all here.
That being said, as we have written multiple times, most recently in Elon’s Fury: The Investment Implications of America’s Ever-growing Debt, the U.S. government does face serious fiscal challenges ahead.
We continue to view inflationary growth as the only realistic and likeliest solution to the $37 trillion problem. Trump clearly intends to choose a successor to Jerome Powell who will be inclined to bring interest rates down and stimulate economic growth and asset price appreciation.
If the U.S. is indeed going to grow/print its way out of its debt problems, long-term investors will likely be much better off owning some combination of stocks, gold and Bitcoin than cash or fixed income instruments. |
| | | The top performing stocks in the Inflation Protection portfolio in June were Freeport-McMoRan (FCX), which returned 13%; WESCO International (WCC), which returned 11%; and Permian Resources (PR), which returned 9%.
The most significant portfolio detractors this month were Brown-Forman (BF), which returned -19%; Costco (COST), which returned -5%; and Franco-Nevada (FNV), which returned -3%. |
| Shares of leading U.S. copper miner FCX are benefiting from a number of catalysts, including a recovering copper price (after sharp declines in early April) and tariffs that would favor domestic producers like FCX.
FCX also benefits from internal cost-cutting initiatives, facility expansions, and a material gold mining operation.
The stock normally tracks or outperforms movements in the copper price but has lagged somewhat in recent months, suggesting there is ample room for catch-up as copper has once again crossed $10,000/ton. |
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| FCX share price vs. Copper price(Last 3 years) |
| Since copper is a global commodity, recent weakness in the U.S. dollar is favorable for FCX profitability. We continue to view FCX as an attractive way to obtain long-term copper exposure.
Like basically all commodities, copper prices will continue to be volatile, but we expect copper to move higher over time as technology-driven structural demand growth outpaces supply growth.
Like basically all commodities, copper prices (and by extension FCX earnings) will also benefit in nominal terms from never-ending growth in the global money supply.
WCC shares continued to recover after the April sell-off.
Similar to FCX, as a leading distributor of electrical and industrial supplies, WCC is closely tied to the electrification theme and directly benefits from growth in AI data centers and electrical power generation.
PR shares advanced off low levels in June, despite the fact that oil prices, which moved briefly higher in the middle of the month, declined after the Iran-Israel ceasefire was brokered.
Notwithstanding Trump’s diplomatic successes, oil prices are at low levels. PR offers access to attractive U.S. domestic oil and gas resources. Even at current energy prices, the valuation is compelling on a cash flow basis.
Low energy prices are generally helpful for corporate earnings in other industries and for the interest rate outlook. This makes a stock like PR valuable in a portfolio context as a hedge on rising energy prices.
BF was the worst performer this month. We decided to eliminate the holding from the Inflation Protection portfolio and replace it with Mid-America Apartment Communities (MAA).
BF has struggled with disappointing liquor demand. Whereas some portfolio positions, like FCX, have benefited from tariff policies, BF has not. U.S. whiskey makers have been the target of retaliatory tariffs by foreign governments.
As we recently described in The Anti-Zohran Trade, MAA is a play on sunbelt multifamily real estate.
Like BF, shares of MAA have struggled somewhat recently, but we view the risk/reward profile of the stock as more attractive. There is also more clarity on the long-term outlook.
MAA will continue to benefit from long-term population migration trends within the United States and medium-term rebalancing of supply/demand conditions in its markets as Covid-era impacts wind down.
As an inflation hedge, MAA captures the very important housing component of inflation measures. To the extent the cost of housing rises over time, MAA shareholders benefit in the form of rising rental income.
As many coastal states and cities move in the wrong direction politically, metropolitan areas in sunbelt states offer workers and businesses a bright future. In many cases, these localities are positioning themselves to participate in AI-driven economic growth.
We view the current moment as an especially opportune time for investors to establish a position in MAA, which offers a 4%+ dividend yield and has delivered exceptional returns for shareholders for 30+ years.
Shares of COST declined modestly this month as investors rotated away from consumer staples and defensive stocks generally.
The portfolio’s gold-streaming plays delivered mixed results this month and as a group were basically flat and lagged the broader market.
The gold price surged in the first four months of 2025 but has been largely stable since. We did see mild upside in gold as tensions with Iran flared up mid-month, but this was reversed as the situation became de-risked. |
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| Gold Price (US$ per Ounce) - Year to Date |
| Gold may be taking a bit of a breather after a strong rally, but we continue to view gold as a core component of any inflation-oriented investment strategy. |
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| | Mid-America Apartment (MAA) |
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| | Diamondback Energy (FANG) |
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| | Floor & Decor Holdings (FND) |
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| | WESCO International (WCC) |
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| | Wheaton Precious Metals (WPM) |
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| | The 76research Inflation Protection Model Portfolio emphasizes business models that are expected to perform well on a relative basis in periods of elevated inflation. Holdings are typically selected from industries based on supply constrained real assets, including commodity and energy businesses, or companies that otherwise demonstrate superior pricing power. Drawing from an investable universe of expected inflation beneficiaries, specific holdings are chosen based on valuation and general business quality, growth and risk considerations. |
| | FOR SUBSCRIBER USE ONLY. DO NOT FORWARD OR SHARE. |
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