Passive Income in 2025—Where the Opportunities Lie

When the facts change, I change my mind.

Unless I don’t.

And today’s dispatch is very much about the facts changing in such a way that I have no need to change my mind.

A strategy I recommended at the beginning of 2024 is just as useful going into 2025… but for an entirely different set of reasons.

First: Yes, I have stolen/borrowed the lead sentence to this dispatch. That line reportedly comes from John Maynard Keynes, the British economist we can thank for the world’s current debt debacle. Keynes believed that government should spend money to force money to flow through the economy.

Inside the halls of academia, I bet that theory works well.

Inside the halls of Congress, and, well, inside governmental chambers the world over, lawmakers of every stripe have perverted the theory. All they read is “government should spend money.” Any qualifiers before or after that are Greek—unless we’re inside the Greek government, in which case the qualifiers are all Martian.

Conveniently, the changing facts I want to reference are tied to government and debt, so this dispatch stitches up really nicely.

But let’s go back to the beginning of the year.

I wrote to Global Intelligence subscribers in January that 2024 was going to shape up as “The Year of the REIT.” My contention was that interest rates were quite likely to head lower at some point in the new year, and that interest-rate sensitive stocks like real estate investment trusts (REITs) would benefit. The net effect, I suspected, would see Wall Street begin snapping up REITs because they are yield machines. And investors want to own high-yield stocks going into rate-cutting season, locking in high income, because when rate cuts happen, yields sink on traditional income investments like bonds and certificates of deposit.

And that’s exactly what played out. REITs have outperformed the market as a whole, and the REIT I recommended outperformed the REIT sector.

Now, however, we’re moving into the upside down…

As I’ve mentioned in recent dispatches, Trump’s economic agenda is going to lead to higher inflation.

As I regularly say—this is not political. I’d offer up an equally negative assessment of Kamala Harris’s agenda, had she won, since her agenda had some profoundly inflationary elements as well.

But Trump won, so he’s the pitcher of record for the economy over the next four years—good, bad, or indifferent.

And starting in January, we have several issues—deportation, tariffs, and various tax cuts—that will send inflation north of 5% again, and probably closer to 7% or 8%.

And here’s where I come to the point that, even though the facts changed, I didn’t change my mind.

So, what facts changed?

• Inflation: Instead of remaining in the 2.5% to 3.5% range, inflation by the end of 2025 will be approaching 5%.
• Interest rates. Instead of coming down farther and staying low, rates will rise. The Federal Reserve will raise rates because of resurgent inflation, and the Fed will return to a “higher for longer” stance.

What didn’t change in my mind?

Now is the time to chase yield—to buy dividend stocks. And that’s what my Retirement Income Masterclass—happening this Saturday, December 7—is all about.

Back at the beginning of the year, chasing yield was about locking in fat dividends before declining interest rates pulled down yields across the board.

Today, as inflation heats up once again, chasing yield is about locking in fat dividends before inflation sends investors in a mad rush to offset inflation and the rising cost of living.

Two very different sets of facts that lead to the same conclusion.

Thus… no changing of El Jefe’s mind.

I am as convinced now as I was back in January that yield stocks are where the action will be in 2025.

Of course, the price is already elevated for lots of yield stocks—the result of the lower interest rate environment I said was in the cards for 2024.

Every stock I recommended back in a February version of my Retirement Income Masterclass is up, except one.

That portfolio was divided between preferred stocks, master limited partnerships, Canadian income trusts, a type of exchange-traded bond called “baby bonds,” and traditional common stocks. And even some of the preferred stocks—which tend to be slow movers—are up between 17% and nearly 28%.

The common stocks are up as much as 37%.

All because investors have spent much of this year grabbing yield where they can find it.

I suspect they’re going to do the same next year.

The good news: A lot of the stocks I recommended in the last Masterclass are still in the buy range today because even though their share price is up, so are their dividend payments—meaning we’re still able to snag some plump yields, despite the price moves.

But other aspects of chasing yield have changed in the last 10 months, and that’s also part of the newly revised Retirement Income Masterclass I’m hosting this Saturday.

I know what many boomer/Xer retirement accounts look like. They’re in desperate need of income.

My message today is simply that the income is out there… if you know where to look.

And you should be looking.

Because while the facts have changed for 2025, the pursuit of yield remains just as important today as it was when 2024 began.