The Trump administration’s bold policy announcements are creating significant investment opportunities across defense contractors, mortgage markets, and technology sectors. For investors thinking about retirement or already in retirement, understanding these market shifts is essential for protecting and growing your portfolio. Tom Dupree, Mike Johnson, and James Dupree from Dupree Financial Group break down how these policy changes affect retirement planning strategies and what it means for your investment portfolio.
Defense Spending Surge Creates Investment Opportunities
The Trump administration’s announcement to increase defense spending from $1 trillion to $1.5 trillion—a 50% increase—sent shockwaves through defense contractor stocks. While initial announcements about dividend and buyback restrictions caused share prices to drop 5-7%, the spending increase announcement triggered a strong rally the following day.
Key Defense Investment Insights:
- Defense infrastructure has been underinvested for decades on a global basis
- Small-cap defense contractors like Credos Defense offer unique positioning with no direct competitors
- The company trades at an 800 price-to-earnings ratio due to its exclusive government contract capabilities
- Credos builds hardware for rockets, drones, and defense systems through two segments: Credos Government and Credos Unmanned Systems
As Mike Johnson explained, “The whole industry, the complex had been underinvested for decades. Different laws and regulations had been passed, allocating capital to other areas. It was basically left in shambles.”
The Commandant of the Marines confirmed on Fox News that current U.S. naval capacity has declined from 600 ships during the Reagan years to just over 300 ships today, highlighting the critical need for defense modernization.
Mortgage Rate Policies Benefit Real Estate Investments
Trump’s directive for Freddie Mac and Fannie Mae to purchase $200 billion in mortgage bonds represents a strategic move to lower mortgage rates and free up the housing market. This policy, likely advised by Treasury Secretary Scott Bessent, is already showing results.
Mortgage Market Developments:
- 30-year mortgage rates touched 5% (down from over 6%)
- TD Cowen analysts project rates reaching 5.25% by year-end
- The policy artificially narrows the spread between mortgage bonds and Treasury yields
- Institutional investors may be restricted from purchasing residential properties
Tom Dupree emphasized the administration’s unprecedented focus: “You don’t see an administration come out and talk about spreads between mortgage bonds and treasuries. This one’s doing it because of Scott Bessent.”
For retirement investors, Dupree Financial Group holds mortgage REITs (Real Estate Investment Trusts) that benefit directly from these policy changes. These companies own large portfolios of mortgage bonds with leverage, generating dividend yields in the teens while experiencing significant price appreciation as spreads tighten.
AI Sector Volatility Requires Strategic Positioning
The artificial intelligence sector continues to demonstrate extreme volatility, with some stocks dropping 50-60% from recent highs while others surge dramatically. Applied Digital, a company held in Dupree portfolios, recently reported earnings that exceeded expectations by 54% (actual revenue: $126 million vs. expected $82 million).
AI Investment Realities:
- SanDisk Corp became the largest S&P gainer in 2025, up 585%
- Applied Digital eliminated losses, reporting zero EPS versus the expected 11-cent loss
- Oracle dropped 40% despite being a mega-cap company
- The equal-weight S&P 500 outperformed the market-cap-weighted index by over 1% in a single day
James Dupree noted about Applied Digital: “They absolutely blew out their earnings. Expected revenue was supposed to be around 82 million, and they ended up reporting 126 million.”
This volatility underscores the importance of personalized portfolio management that balances growth opportunities with income-producing investments.
Market Breadth Signals Healthy Rally Expansion
The broadening of the market rally beyond the “Magnificent Seven” technology stocks represents a significant shift. On one recent trading day, the S&P 500 was flat while the equal-weight S&P 500 gained 1%—a substantial discrepancy indicating money flowing into financials, energy, and mid-cap stocks.
Market Breadth Indicators:
- Small-Cap Russell Index is up approximately 5% over five trading days
- Both momentum stocks (best performers) and deeply oversold stocks (worst performers) led 2025 gains
- The healthcare sector is attracting renewed investment flows
- Mid-cap AI companies ($2-10 billion market cap) are trading as their own distinct sector
Mike Johnson observed, “You don’t typically see the two ends of the spectrum be the best performers in a year. The ones that were above their 200-day moving average were the leaders, the ones that were well under their 200-day moving average came in close second.”
Bear Market Preparation During Bull Markets
Despite strong market performance, the Dupree Financial Group team emphasizes the importance of preparing for inevitable market downturns. The firm maintains strategic cash positions and focuses on dividend-paying stocks to provide income during market volatility.
Bear Market Protection Strategies:
- Maintain cash reserves to buy quality stocks at lower valuations
- Focus on dividend-paying companies for consistent income during downturns
- Take profits strategically even in bull markets
- Avoid forced selling by maintaining adequate liquidity
Tom Dupree reflected on historical perspective: “I remember the market going down 500 points in one day in 1987, which was 22%. That would be about 11,000 points on the Dow today.”
The team emphasizes that separately managed accounts of individual stocks and bonds provide greater flexibility than mutual funds during market stress, allowing tactical adjustments based on each client’s specific income needs.
Income Generation for Retirement Investors
For investors ages 50 and above, the combination of growth and income remains essential. Dupree Financial Group’s approach focuses on dividend-paying stocks that provide cash flow even during market downturns, supplemented by strategic growth positions in sectors like AI and defense.
Dividend Strategy Benefits:
- Provides income without selling principal during bear markets
- Reduces sequence-of-returns risk for retirees
- Creates compounding opportunities through dividend reinvestment
- Offers inflation protection through dividend growth
Tom Dupree emphasized their client focus: “We manage money for people who are typically retirement investors who need both growth and dividends. It’s a lot more fun to talk about growth when things are growing, but we also like dividends and we like to have the certainty of the income, or not certainty, but probability of the income that dividends provide.”
The firm’s approach recognizes that while dividend cuts can occur during severe recessions (as seen in 2008-2009), a well-diversified portfolio of quality dividend payers provides more stability than growth-only strategies.
Frequently Asked Questions
How do Trump’s defense spending policies affect retirement portfolios?
The 50% increase in defense spending creates opportunities in defense contractor stocks, particularly smaller companies with unique capabilities. However, investors should understand these positions as growth components within a balanced portfolio that also includes income-producing investments.
What impact will lower mortgage rates have on investment portfolios?
Lower mortgage rates benefit mortgage REITs (Real Estate Investment Trusts) that own portfolios of mortgage bonds. As rates decline and spreads tighten, these investments experience both price appreciation and high dividend yields, making them attractive for retirement income strategies.
Is the AI sector too volatile for retirement investors?
AI sector volatility requires careful position sizing and risk management. Applied Digital and similar companies can offer significant growth potential, but should represent only a portion of a diversified portfolio that emphasizes income-producing investments for retirement security.
How should retirees prepare for the next bear market?
Preparation includes maintaining cash reserves for opportunistic buying, focusing on dividend-paying stocks for income continuity, and working with advisors who actively manage portfolios rather than passive buy-and-hold strategies. Strategic profit-taking during bull markets creates flexibility during downturns.
What advantages do separately managed accounts offer over mutual funds?
Separately managed accounts provide direct ownership of individual stocks and bonds, allowing customized portfolios tailored to specific income needs, tax situations, and risk tolerances. Unlike mutual funds, you can see exactly what you own and make tactical adjustments during market volatility.
Take Control of Your Retirement Investment Strategy
The current market environment presents both opportunities and risks for retirement investors. Trump administration policies are reshaping defense, housing, and technology sectors while removing artificial market distortions. Understanding these changes and positioning your portfolio accordingly requires experience in both retirement planning and active portfolio management.
At Dupree Financial Group, we specialize in creating personalized investment strategies for investors aged 50 and above who need both growth and income. Our separately managed accounts provide direct access to portfolio managers—not assigned counselors—and transparent communication about exactly what you own.
Don’t leave your retirement to chance or generic mutual fund strategies. Call (859) 233-4000 today for a complimentary portfolio review, or schedule an appointment directly on our website at dupreefinancial.com.
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Investment Advisory Services Disclosure: Dupree Financial Group is a registered investment advisor. The information provided in this podcast and show notes is for educational and informational purposes only and should not be construed as personalized investment advice. All investment strategies and investments involve risk of loss, and nothing discussed should be construed as a guarantee of specific results.
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