Navigating Market Uncertainty: What’s Happening in the US Economy?

Current financial indicators present a confusing landscape for investors. Some signs appear optimistic, while others suggest potential distress. In this article, we will sift through the confusion and examine the underlying realities of the US economy.

Additionally, we will discuss our latest “CEF Insider intel” regarding stock investments and closed-end funds. Moreover, we will highlight one remarkable bond fund yielding an impressive 13%, positioned to benefit amid rising uncertainty.

Investor Sentiment Suggests Alarm

The CNN Fear & Greed index, a well-known sentiment gauge, currently signals a state of crisis.

Source: CNN

Meanwhile, the VIX, often referred to as the “fear gauge,” reveals a different picture. Despite the S&P 500 having recently faced its worst quarter since 2022, the VIX remains unexpectedly subdued.

Your Second Fear Gauge Suggests Limited Concern

As of now, the VIX is at 22.3—heightened compared to the past decade, yet relatively low given the anxious market leading up to April 2 tariff announcements. Historically, during more turbulent times, this measure escalated beyond 25, a level reached multiple times throughout 2022.

If you find yourself recalling 2022, you’re not alone. That year was marked by inflation concerns and economic stagnation, leading to significant market sell-offs.

Today, we will analyze two critical reasons: why 2025 is not a repeat of 2022. We will evaluate inflation and stagnation to understand if these factors represent a legitimate concern for investors.

(Early observation: the short answer is no, but we must be more discerning and consider areas beyond stocks, particularly corporate bonds and the notable bond fund detailed below.)

Inflation Trends Reveal Clarity amid Confusion

Addressing inflation is often fraught with emotional responses from readers who rightly highlight rising prices in stores and other areas. However, it is crucial to examine the data.

Current Inflation Is on a Downward Path

Year-over-year inflation currently stands below 3%, as measured by the consumer price index (CPI). This is a far cry from the alarming levels observed in 2022. It’s true that prices continue to climb, and this has understandably frustrated consumers; yet, the key takeaway for the stock market is the extent of that rise.

The current inflation rate of 3% year-over-year suggests a manageable environment for consumers and businesses alike. As indicated in the chart above, inflation has been gradually trending toward the target range of 2% since its steep drop in early 2023.

In conclusion, inflation is not poised to revisit the distressing peaks of 2022. Although it merits our attention, it is not cause for alarm. However, we must also evaluate the health of the broader economy.

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BlackRock Global Chief Investment Strategist Wei Li recently referenced this chart, highlighting that corporate earnings continue to rise at rates exceeding the historical trend of 6% to 7%. This indicates not only profit growth but also a pace more robust than usual.

Additionally, the S&P 500 reported a 17.8% increase in earnings during the fourth quarter of 2024—the fastest growth since Q4 2021, when companies were rebounding from the economic shutdowns of 2020. This growth lends companies a buffer against tariff impacts and other uncertainties.

Despite these developments, many investors seem to overlook the recent earnings performance, which shows that 77% of S&P 500 companies surpassed expectations during their last earnings reports. This earnings growth is backed by a 4.2% rise in revenue at the start of 2025 and a 2.8% increase in consumer spending, adjusted for inflation.

The insight here is that consumers are spending more, not solely due to rising prices, but also because they are purchasing more goods and services overall.

Businesses are generating higher revenue and expanding profit margins. They are also enhancing operational efficiency, resulting in increased earnings—a favorable scenario for investors. Thus, the recent market downturn presents a worthwhile buying opportunity.

Should Investors Consider CEFs?

As a specialist in CEFs—which typically yield around 8%—I will explore what these developments imply for their investment potential.

Selective CEF Strategy Targets Corporate Bonds Over Equities

Our approach to Closed-End Funds (CEFs) necessitates a very selective strategy during this market environment, focusing on lesser-explored segments beyond equity holdings.

Current CEF Market Overview

In 2025, CEFs have largely maintained stability, with the average discounts to net asset value (NAV) across all CEFs at approximately 5%. Stock funds specifically are experiencing higher discounts at 6.2%. While these figures may initially seem favorable, they fall short of the 8.5% discounts observed in 2022, indicating a market with fewer attractive options.

This decline in discounts is the reason behind our decision to limit the addition of more equity CEFs to our portfolio this year. Currently, we are only holding two tickers within our equity-CEF category.

Preference for Corporate-Bond CEFs

We continue to favor bond funds, particularly those managed to acquire higher-yielding bonds with long durations. These bonds are mostly well-positioned to perform well as interest rates begin to decline, a trend we anticipate will occur as economic activity slows in the second half of 2025.

A prime example of this strategy is the Nuveen Core Plus Impact Fund (NPCT), which boasts a yield of 13% and is currently trading at a 7% discount to its NAV. This fund holds 132 bonds, with an average leverage-adjusted effective duration of 8.7 years, indicating that the value of these bonds is likely to increase as interest rates fall.

Given that NPCT can draw on income from its bonds for nearly ten years, we view the 7% discount as an advantageous opportunity, potentially leading to further price appreciation in the future.

Highlighting High-Dividend Opportunities

As mentioned, it’s not yet the right moment to fully invest during this market correction. However, we are actively researching opportunities rather than simply waiting on the sidelines here.

Opportunities for substantial dividends, such as the 13%-yielding NPCT, remain available. Our focus extends to funds beyond the well-known S&P 500, encompassing corporate bonds, REITs, and mid-cap stocks—sectors poised for growth as interest rates decline in the upcoming months.

We have identified five distinct funds that currently offer rich 8.3% dividends. Due to their undervalued positions, these funds may be set for 20%+ price gains as we transition into the latter part of Year 1 of the new administration.

Investors are misjudging these high-yielding funds, and it won’t take long for market corrections to correct these perceptions. We aim to capitalize on this situation ahead of the broader market recovery. Click here for details on these five hidden funds yielding over 8%, including a free Special report with their names and tickers.

Also see:

• Warren Buffett Dividend Stocks
• Dividend Growth Stocks: 25 Aristocrats
• Future Dividend Aristocrats: Close Contenders

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.