In 2025! A 'steady' investment strategy to survive the Trump market.

2025‼️Investment strategy to ride out the Trump market boom and maintain stability.

Hello, I'm the investment YouTuber Ponchiyo! In this report, I would like to introduce the market outlook for 2025, which is predicted to be turbulent due to the return of the Trump administration, as well as a 'steady' investment strategy that can be used permanently to help you with your future asset formation.

In 2024, with the introduction of the new NISA, many people might have made their investment debut. The first choice for investment then would be index-linked funds such as global stocks and S&P 500. Especially for those who bought S&P 500-linked products as their first investment in 2024, it turned out to be a great year for them.

When considering investments for next year, it is essential to take into account the impact of President Trump. Also, US stocks lead the world and as the world's largest market, they also affect stock markets around the world, including Japanese stocks.

Listing Mr. Trump's main policies again, they are "corporate tax cuts", "deregulation", and "tariff increases." "Corporate tax cuts" and "deregulation" are expected to have a positive impact on the stock market. In particular, deregulation is expected to ease regulations in the financial, real estate, and tech sectors. The current S&P 500 is led by giant tech companies like GAFA but with the Democratic Party-led Biden administration, there has been stronger regulation through laws like antitrust, even though mega tech companies continue to lead the market.

On the other hand, there is a high possibility that "tariff increases" will have a negative impact on the US economy and stock market. The current steady rate cuts are being pushed forward due to the decrease in inflation rates. However, if tariff increases lead to price increases in imported goods and raw material costs, inflation may reignite, and rate cuts may stop. Currently, investors in the market are to some extent considering "rate cuts" before making investments.

Moreover, "tariff increases" not only affect the US but also other countries that engage in imports and exports with the United States, and Japan is no exception. For example, in the case of Toyota, production facilities for the American market are being moved to Mexico. Previously, Mexico was a friendly country to the United States and had low labor costs suitable as a production base. However, statements by Mr. Trump regarding "raising tariffs on cars imported from Mexico" could have a significant impact if implemented. Also, countries like China have become production bases for Japanese companies, and there are expectations for tariff increases on China as well due to political confrontations with Mr. Trump and efforts to reduce the trade deficit. Indeed, during the previous Trump administration (2017-2020), the stock market experienced volatility due to US-China trade disputes and associated tariffs.

Looking back at the S&P 500 movement during the previous Trump administration, over the four-year term, the S&P 500 rose by about 67%. However, examining the details, in the first year of his presidency, there were no sharp drops in stock prices, and they steadily rose. From 2018 onwards, it can be seen that stock prices have been fluctuating due to US-China trade disputes, and bullish statements by Mr. Trump on social media. Even with the emergence of the second Trump administration in 2025 and beyond, it is not difficult to imagine a return of such fluctuations under the 'Trump market'.

I think there are many people who started investing with the beginning of the new NISA in 2024. Also, among them are those who have expanded their assets due to the rising US market in 2024. For investors who have only experienced such 'good markets,' the 'Trump market' after 2025, namely, a market with large fluctuations in stock prices and high volatility, is expected to see panic selling at the timing of a sudden drop, even if it has been an upward market in the long term. Especially for those who are still young in their 20s to 30s and able to take risks, even if they have been investing aggressively, they may still be psychologically weak in a downward market.

In fact, on August 5, 2024, the Nikkei Average experienced its largest decline in history, becoming known as the 'Reiwa version of Black Monday.' At this time, news articles with headlines such as 'loss-cut with the new NISA' were seen. Looking back, although the August decline dropped to the 31,000 yen range, it is understood that it was actually a great buying opportunity. At such times, whether to panic sell or inject funds as a great buying opportunity will greatly affect investment returns. However, almost everyone feels some level of stress in a downward market, and it is difficult not to panic sell or rush to buy in such markets. Since multiple downward phases are expected in the Trump market after 2025, I would like everyone to choose 'investment strategies that do not lose' and 'stocks that do not need to panic sell even in a crash,' as I believe such investment behavior will lead to ultimately successful investment.

In the world of investment, the theory of 'The bird in hand theory' is well known. In essence, it means that 'it is more certain to aim for the bird (income gain available to each individual) in hand now rather than the uncertain bird in the bush (capital gain).' Especially in the volatile Trump market, investing only in growth stocks for capital gains, or in index type investment funds without distributions, can cause anxiety as assets may only decrease during declines. Therefore, during such markets, I would like you to secure a peace of mind by steadily obtaining income gains and dividends through investments in high-dividend stocks, leading to long-term investment. Especially among high-dividend stocks, there are stocks that have continued to pay dividends without cutting them even during the Lehman Shock or COVID-19 pandemic, and stocks that have increased dividends even in such downturns.

I think many people have started investing using the new NISA introduced since 2024. Among these, there are many who are accumulating index funds targeting the S&P 500 and global stocks as part of their RSP investment. As mentioned above, index funds generally do not pay dividends. Going against 'The bird in hand theory,' this situation aims for 'uncertain capital gains (bird in the bush).' Therefore, in the Trump market after 2025, consider high dividend stock investments in growth investment categories. However, even in high dividend stock investments, it is not advisable to simply buy stocks with high yields. The important points in high dividend stock investment are 'sector diversification' and 'acquiring stocks that can be held in peace even during declines.'

First, regarding sector diversification, for example, if the holdings in a high dividend stock portfolio are 'Nippon Telegraph & Telephone Corp,' 'KDDI,' and 'SoftBank,' and all sectors are in the communication industry. In such a portfolio, if the communication industry as a whole falters or legal regulations are enacted, there is a possibility that all holdings may fall into poor performance and stock price declines. As a result, there is a possibility of reduction in dividends, where even 'the bird in hand (income gain)' may not be obtained. In reality, in the communication industry, due to the 'reduction of mobile phone fees' by the Suga Cabinet in 2021 and 'entry of Rakuten as a new communication carrier,' the stock prices of each company dropped significantly. Also, with the reduction in mobile phone fees, profit margins have deteriorated. To prevent such a situation, it is necessary to diversify into '5 or more sectors' when forming a high dividend stock portfolio. For example, in high dividend stocks in Japan, it would be advisable to divide the sectors into categories such as 'communications, A-REIT ETF, construction, industry-Industy, and retail.' Representative examples for each would be 'communications = Nippon Telegraph & Telephone Corp, SoftBank, KDDI,' 'construction = Sekisui House, Haseko Corporation,' 'industry = Itochu, Mitsubishi Corporation,' 'industry = Mitsubishi UFJ, Sumitomo Mitsui,' and 'retail = Yamada HD, Tsuruha.'

It may feel quite challenging to actually find high-dividend stocks by dividing them into industries. However, with MOOMOO Securities, you can search for stocks by industry using the 'screener' function (also available from the app). Therefore, if you want to find high-dividend stocks in a specific sector, you can easily find them by specifying conditions such as 'designated industry + dividend of 3% or higher'.

So, if you diversify by sector, what kind of stocks should you buy? Especially in a volatile market like the Trump market, it is important to have stocks that can be held with peace of mind even in sudden downturns. For example, if there is a company that continues to increase dividends even in a bear market due to a decrease in stock prices, you will be able to hold on while expecting 'the dividends will increase again anyway'. You may also want to increase your holdings of high-dividend stocks where stock prices fall and yields rise during market downturns.

So, what should you focus on when selecting 'stocks that can be held with peace of mind'? What I consider important are '① consecutive dividend increases', '② revenue growth', and '③ operating profit growth'. First of all, regarding '① consecutive dividend increases', it is an important aspect to consider in order to confirm 'the leeway to increase dividends', 'the consciousness of returning to shareholders', and 'the benefits of holding on'. Especially with regard to the number of consecutive dividend increases, it is crucial to value achievements in overcoming major market downturns such as the Corona shock, where '5 years or more' is a key factor. Also, in the case of U.S. stocks, since there is a high consciousness of returning to shareholders and a long history of consecutive dividend increases, it would be wise to select those with 'consecutive dividend increases of 20 years or more' that have overcome the two major crash markets of the 'Lehman shock' and 'Corona shock'. In the case of high-dividend stocks in Japan, it may be worth considering purchasing 'cumulative dividend stocks' instead of consecutive dividend stocks. 'Cumulative dividend' refers to stocks that have not reduced dividends for a certain period, and in Japan, there are stocks that have existed for more than 40 years without reducing dividends, such as 'Life Corporation', 'Nisshinbo Holdings', and 'Asahi Group Holdings'. By purchasing such stocks, you can hold on with peace of mind even in a sharp market downturn.

As for the remaining two important points in choosing high-dividend stocks, '② revenue growth' and '③ operating profit growth' provide perspectives on the long-term performance. In order to continue to pay dividends steadily, it is essential for companies to show performance growth. Among high-dividend stock stocks, there are companies that are stretching their performance but forcing dividends. Such companies will eventually be unable to secure profit, the source of dividends, and will have to reduce dividends. To avoid such stocks, we recommend purchasing stocks with a long-term growth trend. In addition, regarding the 'revenue growth' as a focus point, it is important for assessing the growth of a company's business scale. Operating profit represents the actual earning power in the main business, calculated as 'revenue - (cost of goods sold + selling and administrative expenses)'. There are cases where even if sales expand, the earning power weakens, and the operating profit continues to decline.

So far, I have discussed the important points of '① consecutive dividend increases', '② revenue growth', and '③ operating profit growth' in selecting high-dividend stocks, but stocks that meet '① consecutive dividend increases' often also meet '②' and '③'. On the other hand, stocks that achieve '② revenue growth' and '③ operating profit growth' also tend to fulfill '①'.

Now, how can we find stocks that actually meet points ①-③? If you try to go through each company's IR materials, the day will end. Fortunately, MOOMOO Securities' screener allows you to search by "consecutive dividend increase years," "average annual revenue growth rate," and "average annual operating profit growth rate." For search criteria, it is advisable to select companies that have maintained stable growth of 5% or more in both the average annual revenue growth rate and the average annual operating profit growth rate. Also, since the screening criteria do not include "consecutive years of growth," after hitting the screening, check sources like fiscal reports to confirm if the company has been growing every year.

This time, I explained about creating a high-dividend portfolio that can be held with peace of mind even in a market rapid decline by focusing on "sector diversification" and "3 points for choosing stocks." By paying attention to the above content and using MOOMOO Securities' screener for stock searches, I believe it will be easy to complete a high-dividend portfolio. So after completing the portfolio, how should you prepare and manage it?

First of all, when the market sees a rapid decline, consider "continuing to hold & make additional purchases with dividends." If the selected stocks meet the above conditions, they are expected to maintain performance and continue to increase dividends even in a declining market. The immediate drop in stock prices is just noise. Also, if dividends are deposited from held stocks during a rapid decline, it is an excellent opportunity to make additional purchases. If you are aiming for income gains, do not worry about the decrease in asset value during a rapid decline, instead consider the "dividends will eventually come in" as a mental stability agent and ride through calmly without resorting to panic selling.

In a high-dividend strategy, it is important not to panic sell in a rapid decline, but there are times when it is necessary to "sell." That is when the "3 points for choosing high-dividend stocks are no longer met" and "end of the year with unrealized losses in held stocks." First, regarding the situation when the "3 points for choosing high-dividend stocks are no longer met," the reason you can continue to hold high-dividend stocks even in a rapid decline is because they have been following "① consecutive dividend increases," "② revenue growth," and "③ operating profit growth." However, even if the stocks met the 3 points at the time of purchase, companies' performance may deteriorate over time, leading to cuts in dividend payouts. In such cases, if the reason for not selling despite a rapid decline disappears, consider selling. Listed companies disclose their performance with earnings reports every 3 months, so make sure to check the performance of the companies you invest in at that time. Conversely, stock price fluctuations outside of earnings report periods can generally be ignored unless something major happens.

Another timing to consider selling high-dividend stocks is when "held stocks have unrealized losses at the end of the year." In practicing high-dividend investments, some stocks may have "unrealized losses" even though their performance has not deteriorated. The reasons for unrealized losses include "the stock price level at the time of purchase was too high" and "being dragged down by a downturn in the overall stock market." If the stocks continue to meet the "3 points for choosing high-dividend stocks," there is no issue. However, if you are in a state of "unrealized losses at the end of the year," consider selling once. In the investment world, there is a process called "tax loss harvesting." Tax loss harvesting involves selling stocks that have unrealized losses at the end of the year to realize the losses and offset them against the annual realized profits (capital gains & dividend income) to recover taxes. In the case of high-dividend stock investments, as dividend income continues throughout the year, you will generally have a positive investment balance and need to pay taxes. If there are stocks with unrealized losses at the end of the year, sell them for tax purposes to recoup the taxes paid on the dividend income. Additionally, if the sold stocks continue to meet the "3 points for choosing high-dividend stocks," you may repurchase them with the cash obtained from the sale.

In high-dividend stock investments, it is generally fine to leave them even if the stock prices fluctuate. However, make sure to check the earnings reports every 3 months, perform year-end tax loss harvesting, and conduct regular maintenance.

The high-dividend stock strategy is based on investing based on performance and dividend increases. However, if you are going to invest from now on, it is the true intention of individual investors to want to select stocks with themes that match the trend of 2025. So what would be the focus themes for Japanese stocks in 2025?

One of the first focus themes is "defense-related stocks". In 2024, Mr. Ishiba became the Prime Minister, and he has always had a positive political stance towards "strengthening defense capabilities". In addition, with the future defense budget secure due to defense tax increases, government funds are expected to flow into defense-related stocks. In the world of investing, there is a saying, "Do not go against national policy," so it is better to invest in line with such government policies.

The second focus theme is "rising interest rates". Inflation has started since 2023, marking an end to the long period of deflation. The Bank of Japan has also taken steps toward actual interest rate hikes, ending the era of negative or zero interest rates and ushering in a "world with interest rates". Furthermore, this rate hike is expected to continue considering factors such as rising prices. Therefore, financial and banking stocks that benefit from this interest rate hike are worth paying attention to.

You might think it's difficult to find individual stocks related to themes like 'defense-related' or 'rising interest rates'. However, with moomoo's screener function, it is possible to search by theme. By selecting stocks based on current trends in addition to the three points mentioned earlier for choosing high-dividend stocks, you can aim not only for income gains but also for capital gains.

This time, the focus was on high-dividend stock investment looking ahead to 2025. However, the points and maintenance methods for selecting high-dividend stocks introduced this time will be methods that can be used not only for 2025 but permanently. In fact, since my early retirement in March 2022, I have adopted an investment policy aimed at income gains based on the method introduced this time. I hope that everyone can build passive income by practicing the high-dividend strategy.