TheChek News Flow

The Gut-Wrenching Play in Investing Right Now: Buy and Hold

The biggest weekly decline for stocks since early April is again testing the risk appetite of everyday investors

Key Points

When a chunk of Bill Jensen’s retirement savings got wiped away in early April, he started to second-guess himself.

His wife urged him to consider switching their savings from stocks into safer investments, but Jensen insisted they wait for the market to rebound. The retired 68-year-old tried to reassure both of them by sending emails showing the gains when their portfolio ended in the green.

Seven weeks later, the couple’s investments had recovered most losses, Jensen said. But rather than taking his risk down a notch, he recommitted to the stock market.

This week, stocks fell again.

The S&P 500 retreated 2.6%, its largest weekly decline since early April, the week of President Trump’s globe-spanning tariff announcement. The benchmark index declined 0.7% on Friday after Trump threatened new tariffs on the European Union and on iPhones made overseas, adding fuel to the trade fears.

Such is the gut-wrenching nature of being a buy-and-hold stock investor these days, with volatility poised to continue. The spring’s tariff turmoil has been a sudden shift for investors who were rewarded with steady gains and few prolonged slumps for their portfolios over the prior two years. It has marked a major test of individual investors’ risk tolerances.

“You have to take the good with the bad,” said Jensen, who added that he had “some moments of regret” during the April selloff. On Friday afternoon, he said he was more optimistic.

It is a truism of long-term investing not to sell in the middle of market upheaval. But that can be excruciating right now, investors say.

Jon Ulin, managing principal at Ulin & Co. Wealth Management in Boca Raton, Fla., said he has been spending lots of his time offering clients moral support in addition to investing advice. He encourages them to stick with their original investing plan and reassures them not to switch seats on an airplane that is going through turbulence. Many just want to hear his voice.

“It’s like a self-help line,” he said.

Some big money managers have been advising a more cautious stance toward the market in recent months. Fund manager Vanguard, for example, has suggested investors consider flipping the classic 60/40 split between stocks and bonds for a more conservative, roughly 40/60 approach.

People who are at or nearing retirement, or who have to shell out money soon for big expenses like college tuition, are thinking especially hard about where to stow their money.

Myra Sletson has lived through enough market cycles to know when to walk away from risk, she said. The 69-year-old retired banker in central Pennsylvania said tariffs were the reason she moved 80% of her portfolio into money markets and CDs. Past downturns, like the 2008 financial crisis, felt more manageable, she said. “I was younger then—in my 50s—with more time to recover.”

Sletson had already been growing cautious, but the April selloff confirmed her decision to shift into safer assets. She says the 4% to 5% returns on certificates of deposit felt like a better deal than staying in the stock market. She doesn’t plan to sit on the sidelines forever. “This just isn’t the moment to be brave,” she said.

There are signs more individual investors are starting to take profits. They pulled a net $555 million out of the stock market on May 12, JPMorgan analysts found, marking the first day of net outflows since April 8, when the S&P 500 hit a low in the week following Trump’s tariff announcement.

But others embraced the risks and bought the dip. They were rewarded for it after major indexes rapidly regained April losses. The retail crowd poured roughly $50 billion into equities between April 8 and May 14, according to an analysis from JP Morgan.

As stocks fell in April, Paul Spriggs didn’t touch his portfolio, including two six-figure 529 college savings accounts invested in target-date funds with significant equity exposure.

History is on his side: Research shows that missing just a handful of the stock market’s best days in the past several decades could shrink an investor’s long-term returns by more than 30 percentage points. Those standout days frequently happen in downbeat markets: Two of the S&P 500’s best days on record took place during October 2008.

Spriggs said it was tough to watch the losses earlier this spring, but not enough to nudge him out of the stock market.

“I’ve got enough of a timeline that I think I can recover,” Spriggs said. “I don’t come from money. I’m a middle-class kid. The only way to get ahead is to play the long game.”

Donald Trump issues directive to fast-track nuclear energy development

Executive orders aim to pave the way for construction of 10 large reactors

Donald Trump has directed the government to fast-track construction of nuclear reactors and reform the “risk averse” culture of regulation in a bid to quadruple the US’s atomic energy capacity by 2050.

The president on Friday signed four executive orders that instructed the Department of Energy to facilitate the start of construction for 10 large reactors by 2030 and help finance power upgrades to existing reactors.

In a factsheet accompanying the executive order, the White House said the Nuclear Regulatory Commission had an “overly risk-averse culture”, which requires nuclear facilities to emit as few emissions as possible, including below naturally-occurring levels.

Other measures in the orders include an 18-month deadline for the NRC to approve new reactors and to boost US uranium and nuclear fuel capacity. The orders also called on the energy and defence departments to facilitate development of reactors on federal lands.

“The NRC has failed to license new reactors even as technological advances promise to make nuclear power safer, cheaper, more adaptable and more abundant than ever,” the factsheet said.

White House science and technology policy director Michael Kratsios said that the executive orders would kick-start an “American nuclear renaissance”.

“America’s great innovators and entrepreneurs have run into brick walls when it comes to nuclear technology,” he said.

Nuclear proponents welcomed the administration’s support for a sector which has been plagued in recent decades by long delays to build plants as well as cost overruns. They say nuclear is needed to meet booming artificial intelligence-fuelled energy demand and to lower the US’s carbon dioxide emissions.

“This is an incredible day for nuclear,” said Isaiah Taylor, chief executive of Valar Atomics. He said it was set to open a nuclear reactor in Utah by the end of the year. “The new posture is one of dominance.”

Jacob DeWitte, chief executive of nuclear power start-up Oklo, said that the executive orders provided an opportunity to “bring regulatory regimes back to what their intents were”.

“We need to couple this with permitting reform,” he added.

The proposal to radically reform the NRC will cause concerns among nuclear safety advocates, while other industry experts questioned whether the orders are far-reaching enough. The sector is notoriously cost and capital intensive and also faces tariffs and uncertain government support.

“How can you plan a multibillion-dollar project and finance it when you don’t know [how long Inflation Reduction Act] tax subsidies, tariffs, or what Trump is signing today will be around?” said an industry insider.

“Had it gone through 60 votes in the Senate, as a business person, I’d have put more faith in that,” they added.

Nuclear industry critics warned the Trump administration’s actions risked undermining public trust in the sector by weakening the oversight role of the Nuclear Regulatory Commission.

“By fatally compromising the independence and integrity of the NRC, and by encouraging pathways for nuclear deployment that bypass the regulator entirely, the Trump administration is virtually guaranteeing that this country will see a serious accident or other radiological release,” said Edwin Lyman, a nuclear expert at the Union of Concerned Scientists, an environmental advocacy group.

“Such a disaster will destroy public trust in nuclear power and cause other nations to reject US nuclear technology for decades to come.”

Some industry experts said the administration’s plan to facilitate construction of 10 large nuclear reactors was ambitious given that only two large-scale reactors have been completed in the US over the past two decades. Both reactors at the Vogtle plant in Georgia cost more than $30bn to complete, double their initial estimates.

Shares in Oklo, the small modular reactor developer backed by OpenAI chief executive Sam Altman, jumped 23 per cent. NuScale, which also designs SMRs, gained 19.4 per cent.

Nuclear fuel company Centrus Energy’s share price rose 21.6 per cent, while, Cameco, the world’s largest publicly traded uranium company increased 11.1 per cent.

Gains in utility-scale nuclear companies such as Constellation Energy and Dominion Energy were more muted, with share price rises of 2.1 per cent and 1.1 per cent respectively.

The reluctant newsman: How the Telegraph finally found an owner

After two years of false starts, RedBird Capital Partners is buying Britain’s rightwing paper for £500mn

After 717 days, two law changes, one election and a revolving cast of Tory power brokers, Emirati ministers and Downing Street policymakers, the tortuous sale of the UK’s Telegraph newspaper may — finally — be drawing to a close.

On Friday, RedBird Capital Partners agreed to buy the media group for £500mn, in a deal that would make the US private equity group the sole controlling owner. The transaction leaves the door open for Abu Dhabi’s IMI to take a minority stake, after the British government last week changed the law to allow up to 15 per cent of a domestic newspaper to be owned by a foreign state. 

But two years after Lloyds Banking Group seized control of the Telegraph Media Group from the Barclay family, its owners since 2004, the deal remains an outline. 

RedBird boss Gerry Cardinale — a former Goldman Sachs banker with little news pedigree — will take control of the UK’s leading rightwing broadsheet, with the Middle Eastern buyers for whom he originally instigated this deal relegated to minority backers. 

He is still seeking UK investors to back the deal. And the American investor’s plans for the Telegraph are only just becoming clear.  

“I don’t have a tremendous experience in news,” Cardinale, who manages $12bn in assets across RedBird’s portfolio of sports, media and entertainment, told the Financial Times on Friday.

“But I have a tremendous amount of experience growing intellectual property-based businesses and this is very familiar territory to me. All the foundation stones are there for me to do what I do really well, which is create a global media company rooted in world-class journalism.”

The news rookie — who initially had little interest in owning this kind of business, according to people close to the deal — will assemble a board of heavyweight advisers to help oversee the newspaper. Former FT editor Lionel Barber also acted as an informal adviser to Cardinale on the deal, according to several people familiar with the situation.

The new owner’s playbook centres growth on the US. “There is real white space in America in terms of centre right and there’s really no global counterpunch to the New York Times,” Cardinale said. “The Telegraph has got all of the foundations that enable it to aspire to that kind of global breadth and heft.”

The unusual structure of RedBird’s deal to buy the Telegraph reflects its troubled history: the US investor is in part buying the media group from itself. 

RedBird IMI, the joint venture that is three quarters funded by Abu Dhabi royalty, first struck a deal to buy the Telegraph in 2023. After provoking uproar in the newspaper’s newsroom and on the backbenches of the UK parliament, the deal was blocked last year by the former Conservative government over fears around foreign state influence over a national newspaper. 

The final say over the transfer of control between the joint venture partners still rests in Abu Dhabi, given its majority ownership of RedBird IMI — controlled by Sheikh Mansour bin Zayed al-Nahyan, vice-president of the United Arab Emirates and owner of Manchester City football club.

But the terms of the deal — which still requires regulatory approval — have been carefully crafted to ease political angst.

IMI is expected to take the now-maximum permitted 15 per cent interest in the newspaper. It would become a “passive investor”, said one person close to the deal, with no intention of taking a board seat. About £100mn — or about two times the group’s underlying earnings — will be funded through debt. 

RedBird has committed to fund the remainder of the deal’s value, said people close to the transaction, although the group is in talks with other UK-based minority investors. Those include Daily Mail-owner Lord Rothermere’s DMGT, which is likely to take 10 per cent. 

The US group — once dismissed by some as a front for the Abu Dhabi buyers — could find itself on the hook for at least £300mn. That money will not be coming from its Middle Eastern partners, say people close to the company, adding that RedBird does not have any IMI or other UAE money in its funds and will not take any debt funding from the Emirati state.

Those close to the talks said that IMI would have rather the government had set a higher threshold, but that 15 per cent represented a good compromise. “This will soft-land the whole saga so that the relationship between the two countries can get back to normal,” one said.

The Telegraph fiasco contributed to a souring of relations between the UK and UAE in recent years, according to people close to the deal.

Other issues, including investigations into the financial conduct of Sheikh Mansour’s Manchester City — the club denies all charges — also contributed. But Emirati officials were shocked and angered by the hostile comments made by MPs in parliament about the control of UK media. 

“The UAE has been furious about how they were treated,” said one, a situation that also tested relations with Cardinale’s RedBird.

Since being elected last July, Sir Keir Starmer’s Labour government has tried to smooth relations with the Emirati state. The issue of foreign state ownership of UK media was raised by officials on the prime minister’s trip to the UAE in December, according to people familiar with the matter.

Around the same time, Cardinale — who was spending much of his time in Los Angeles overseeing a deal to buy Hollywood group Paramount — decided that he needed to take a more hands-on role to try to resolve the situation. 

Cardinale met the newspaper’s management, editors and UK politicians, before becoming comfortable that there was an opportunity to generate decent returns from the business. 

“As I watched everything play out, I saw that the right thing is for a growth equity investor like me to come in and take this thing to the next level,” Cardinale told the FT.

A deal began to take shape in January for Cardinale, after the end of an exclusive period for talks with a different preferred bidder, Dovid Efune, the owner of the New York Sun.

In March, the RedBird boss visited Downing Street to meet Varun Chandra, the business adviser to Starmer, and Sultan al-Jaber, a top UAE minister politician who has multiple roles in Abu Dhabi including head of its oil company. Representatives from the UK’s Department for Culture, Media and Sport also attended the meeting.

Officials — also being lobbied by other British media groups concerned that a valuable source of overseas funding had been throttled — sought a solution to allow IMI to protect at least some of its investment.

Even now, a deal is far from done. The rival bid by Efune, backed by former cabinet minister Nadhim Zahawi and millionaire investor Jeremy Hosking, remains on the table, although was struggling with financing.

But those involved are confident that there will be few of the issues that caused delays to date. None of RedBird’s existing UK investments are in news media, although Rothermere’s potential involvement may attract scrutiny over media plurality. 

If successful, the takeover could be a fresh start for the Telegraph newsroom, reeling after two years in the headlines. RedBird plans to reinvest the cash made by the Telegraph alongside its own funds to increase digital subscriptions and grow its brand in the US. 

Cardinale himself addressed Telegraph senior managers on Friday, striking what one insider called an “apologetic and ebullient” tone — “albeit realistic about how difficult it would be to crack America”.

He emphasised the independence of its editorial team, pledging funds for acquisitions and setting an ambition to boost cash flow to £100mn in what he described as a long term holding.

In a nod to the Telegraph political heartland, he mentioned that he had met Conservative leader Kemi Badenoch this week.

A resolution might also ease one sore point in the UK-UAE relationship, said people familiar with the Emirati state’s position.

“This government inherited a relationship with the UAE that was in a difficult place,” said one UK official.

“The country is a really important regional ally and investor in the UK . . . They need to see they have a relationship that is valued with the British government.”

Victoria’s Secret shows poison pills aren’t always toxic

Rather than a bidder, lingerie retailer may simply need more time

Victoria’s Secret is trying to repel an admirer. The US lingerie company has moved to adopt a so-called poison pill defence after Australian investment group BBRC International boosted its stake in the company to 13 per cent, declared its holding an “active” one and made regulatory filings that would allow it to increase its holding to almost 50 per cent.

The company’s defence mechanism works like this: once an investor acquires more than 15 per cent of Victoria’s Secret, all other shareholders will be entitled to purchase one new share for every share they currently own at a 50 per cent discount. The plan, aimed at making it prohibitively expensive for any investor to acquire a controlling stake, will remain in effect for one year.

These kinds of takeover shields, whose use jumped during the Covid-19 pandemic, are cropping up once again. Companies whose share prices have been walloped by the recent market turmoil are rushing to shore themselves up against bids from opportunistic rivals. They can also be useful to repel activist campaigns — a rising phenomenon — by putting a lid on the stakes such investors can buy.

Already, 13 public companies in the US have adopted poison pills for the year to date, according to Deal Point Data. More are in the works, Lex hears from advisers busily helping clients put together plans they can keep in reserve, as well as update existing ones.

Poison pills rarely get triggered. The simple fact of their existence can leave a bitter taste. By protecting entrenched management and boards from takeovers, they dull some of the pressure to perform. They also remove an element of choice from shareholders who may want to maximise their returns by selling their stakes in an acquisition.

But they do serve a function, especially in the US where it is possible for investors to buy up near-controlling stakes without negotiating with management, paying a premium, or worrying about thresholds at which they would have to bid for the whole company.

Victoria’s Secret, which was spun out of L Brands only four years ago, has good reason to fight for its independence. Once the linchpin of the $12bn-a-year US lingerie market, the company has struggled in recent years as its push-up bras fell out of favour. Its stock is still languishing about 70 per cent below its peak in 2021.

Under new CEO Hillary Super, the company is showing signs of a turnaround. It reported its first rise in annual revenue and net profit in three years. Rather than a bidder, Victoria’s Secret may simply need more time. Sometimes these pills can be more prophylaxis than poison.

Madrid’s stance threatens alliance unity amid preparations to meet Trump’s military spending demand in June

Spain is the last major holdout on a Nato plan to announce early next month that the entire alliance will spend 5 per cent of GDP on defence by 2032, a target demanded by US President Donald Trump.

Madrid is under pressure to commit to the target and enable Nato to announce that all its members will meet the pledge at a meeting of its defence ministers in Brussels on June 5, four officials briefed on the preparations said.

Trump has demanded Nato countries hit 5 per cent or risk losing US protection, in a drive to “equalise” the cost of defending the alliance.

Diplomats are straining to secure unanimous Nato backing ahead of the alliance’s leaders’ summit in The Hague on June 24, where many hope Trump will accept the promises of increased spending and reaffirm US security guarantees to Europe.

But Spain was still yet to confirm that it will support the 5 per cent pledge, the officials said, potentially blocking a unanimous statement, undermining alliance unity and complicating the preparations for The Hague.

US secretary of state Marco Rubio said he had “urged Spain to join allies in committing 5 per cent of GDP to defence”, after meeting Spain’s foreign minister in Washington this week.

But the Socialist-led Spanish government is refusing to address the demand head-on in public.

Spanish foreign minister José Manuel Albares said: “There was an exchange [with Rubio] and both of us expressed our views very clearly. I insisted that it was a huge effort to reach two per cent, and that the debate right now needs to focus on capabilities.”

Spain has long been a laggard on defence spending. Prime Minister Pedro Sánchez only said this month that Spain would meet Nato’s current 2 per cent spending target this year, as he unveiled a €10bn defence investment plan. He had previously said Madrid would hit 2 per cent before 2029.

Under a scheme drawn up by secretary-general Mark Rutte, the allies will commit to spend 3.5 per cent on core defence expenditure by 2032 and an additional 1.5 per cent on related spending such as cyber security and defence-adjacent infrastructure.

Margarita Robles, Spain’s defence minister, said this week she had told a meeting of Nato counterparts that “we understand that the important thing is not so much talking about specific percentages, but rather developing capabilities and fulfilling missions”.

Madrid has consistently argued that it makes big contributions to Nato, EU and UN missions that are not quantified in the figures.

No Nato ally currently spends 5 per cent on defence according to the alliance’s strict existing criteria. But two officials said that the 3.5 per cent figure was more critical, given that almost all allies already spend 1.5 per cent of GDP on the areas set to be covered by the second portion of the target.

US ambassador to Nato Matthew Whitaker said: “5 per cent is our number,” earlier this month. “We’re asking our allies to invest in their defence like they mean it.”

If Spain agrees to the pledge, Nato plans for the defence ministers in June to use the meeting to discuss technical details of the scale-up, including potential milestones between now and 2032, according to Nato diplomats.

Bernardo Navazo, founder of Geopolitical Insights, a Madrid-based consultancy, said Spain’s government recognised the need to spend more than 2 per cent, but had to buy time to “work on an accompanying public discourse, because as a country we come from a tradition that is more pacifist and anti-militarist”.

But Navazo saw the US target as unrealistic. “For countries like Spain and Italy, it will be very difficult to get their populations to back 5 per cent in a context where people perceive no imminent threat, even if the leaders say we are part of the EU and the EU faces a security threat from Russia.”

For every dollar in gambling tax revenue, U.S. states spend under a penny on problem gambling. The gaming industry spends even less. Millions of gamblers are at their mercy.

Playing the ponies is one of many Kentucky Derby traditions and rituals, alongside pastel pinks and feather fascinators. The gates open at 9 a.m. on the first Saturday of every May. By 10 o’clock two commentators appear on enormous screens to run through the odds and their picks for the day’s 14 races. In between events, an announcer’s baritone booms over the PA system: “If you don’t bet, you can’t win!”

This year, for the second time, Toby Coggins and his sister made the pilgrimage to the Churchill Downs raceway from College Station, Texas. Leaning against a wall near a complimentary cocktail booth, Coggins scrolls through the in-house betting app advertised on billboards around the track. He doesn’t usually gamble. “I’m just not a big risk taker,” he says. “But here it’s all part of the fun.”

About a quarter of Kentuckians placed bets on horses in 2021, according to an Ipsos survey. Today, those gamblers have far more options. In September 2023, Kentucky became the 38th U.S. state with legal sports betting.

Sports wagers, mostly placed through smartphones, have already trampled the state’s horse bets.

In the 12 months after Democratic Gov. Andy Beshear placed the state’s first legal sports bet—a $20 parlay on Kentucky college football—Kentuckians wagered $2.4 billion on sports. Bets on horse racing fell 8% to $196 million.

The betting trend has played out much the same way across the U.S. Americans now wager roughly $150 billion a year on sports, and 48% of American men under 50 have an account on a digital sportsbook at sites like DraftKings, FanDuel, ESPNBet, and BetMGM, according to a Siena College survey.

The wagers have generated a surge of new interest in professional sports leagues. State coffers are being filled with new tax receipts, and struggling media companies are stuffing commercial breaks with ads for betting apps. It’s all part of a national gambling honeymoon in the wake of a 2018 Supreme Court ruling that cleared the way for nationwide sports betting.

But addiction experts say a public-health time bomb is ticking. Gambling on smartphone apps carries higher addiction risks than traditional wagers like those at casinos and horse tracks, according to the Journal of Behavioral Addictions. Internet search queries related to gambling addiction “have consistently increased year over year since 2021,” a recent study in the Journal of the American Medical Association found.

It takes around seven years for someone with a gambling problem to first present for treatment, experts say, meaning a wave of problem gamblers have yet to identify themselves. When they do, the healthcare system is sure to be overwhelmed. Kentucky has five counselors certified to treat an estimated 60,000 problem gamblers, according to the state’s problem gambling council. Nationwide, there’s no accurate count of gambling counselors and no universal standard for certification.

U.S. states raked in $14.4 billion worth of gambling tax revenue in 2023, according to the National Association of Administrators for Disordered Gambling Services, and allocated $134 million of that revenue to gambling addiction services. For every dollar states made from gambling, less than a penny went to addressing its harms.

Gambling addiction affects millions of Americans, and research shows it’s associated with higher rates of suicidal thoughts, domestic violence, child neglect, social isolation, economic insecurity, substance abuse, unemployment, homelessness, and crime.

Since 1996, the Kentucky Council on Problem Gambling has used privately raised funds to produce public service announcements and train local operators at the 1-800-GAMBLER hotline, which directs callers to treatment resources like Gamblers Anonymous. For years, though, the council struck out on its main goal to get state funding for problem gambling services—what Executive Director Mike Stone called “a 23-year quest of advocacy.”

It took an expansion of state-sanctioned gambling for that funding to materialize.

After four years of back and forth, Kentucky in 2023 passed a bill to legalize sports betting beyond thoroughbred racing. To win over a group of holdouts in the state Senate, lawmakers added a problem gambling assistance account to the legislation. It earmarked 2.5% of the state’s new gambling tax revenue to fund workforce training, treatment, and research. The remainder goes to the state’s pension fund for public employees.

DraftKings, FanDuel, and BetMGM were among the gambling firms that advocated for the bill. In total, the industry spent $443,000 lobbying the Kentucky legislature in 2023, state records show.

DraftKings was enthusiastic about the bill’s passage. In August 2023, the company boosted its revenue outlook for the year, calling out $20 million in new revenue expected from Kentucky in the final three months of the year. Soon after, DraftKings told investors it had signed up more than 5% of Kentucky’s adult population within five weeks of going live in the state.

The grants from the problem gambling fund moved slower.

After the Kentucky bill passed, Stone says he “immediately got phone calls and folks saying, ‘Well, what are you going to do with all this money?’” he says with a laugh. “My response was, ‘What money?’”

The fund currently has $1.8 million, but disbursement has been slowed by red tape. Every dollar distributed from Kentucky’s gambling fund requires a grant request, extensive paperwork, and a public comment period lasting up to 120 days, an arduous task for any administrator.

The 2023 law includes a clause that caps administrative spending at $50,000, so Kentucky’s system hinges on one part-time worker—despite an expected explosion of problem gamblers in the coming years. “They just flat don’t have the money to fund a full-time person,” Stone says. It took the fund 13 months to fill its first grant.

In the Kentucky town of Owensboro, 83 miles west of Churchill Downs, RonSonlyn Clark has been treating people with gambling disorders for more than two decades. After 10 years as a substance abuse counselor, Clark took a problem gambling training course in 1998. She was surprised by how often gambling came up at the battered women’s shelter where she worked. Studies show that around a third of problem gamblers have been victims or perpetrators of intimate partner violence.

Today, she trains gambling counselors in Owensboro and at the University of Indiana, sits on the board of an international organization that licenses gambling counselors, and works alongside Stone as president of the Kentucky Council on Problem Gambling.

She says her career has been a battle against the public’s dismissal of gambling issues. Pathological gambling was first classified as a mental disorder in 1980 by the American Psychiatric Association. The public view still hasn’t caught up with the science, though, Clark says.

“There’s a whole lot of people who think it’s a moral issue. Why should we care?” she says. “They don’t understand it’s brain chemistry.”

In Kentucky, gamblers’ shame is at odds with state pride around the country’s most iconic betting event.

“When you think of the Derby, you think of beautiful hats, stately horses, mint juleps, pageantry, pomp and circumstance, and the fun that’s involved,” Clark says. “You don’t think of somebody out back getting ready to shoot themselves because they bet $10,000 on a horse and they’re not going to be able to make their house payment.”

An 11-year study ending in 2016 found that one in five people with a gambling disorder had attempted suicide. The National Council on Problem Gambling estimates 1% of American adults, or 2.5 million people, meet the criteria for disordered gambling.

The federal government, which collected roughly $370 million in federal excise tax on sports gambling last year, has no programs in place for that group. The U.S. Substance Abuse and Mental Health Services Administration, by contrast, has an annual budget of $7 billion.

The disparity has caught the attention of a few U.S. lawmakers. “I think that the federal government has a right to say, let’s use this to make people healthier,” Rep. Andrea Salinas (D., Ore.) says of the taxes collected on gambling. Last year, she co-sponsored a bill called the Gambling Addiction Recovery, Investment and Treatment, or GRIT, Act, which would shift 50% of those funds to problem gambling treatment and research.

It stalled in Congress. The gambling industry spent $39.2 million on federal lobbying efforts in 2024, according to OpenSecrets.org. “They have come out hard against this bill,” Salinas says.

The American Gaming Association says its opposition to the bill stems from the underlying excise tax that would fund the problem gambling initiatives.

“The AGA opposes the GRIT Act and supports bipartisan legislation, the Discriminatory Gaming Tax Repeal Act of 2025, that would repeal the excise tax on legal sports betting operators to ensure we can effectively migrate Americans into the protections of the regulated market,” Chris Cylke, senior vice president of government relations at the American Gaming Association, said in a statement.

The AGA points to $472 million in responsible gaming expenditures like customer service, education, and research that its members make annually. That total is 0.7% of the industry’s revenue last year, which came to $71.9 billion. States, by comparison, spent 0.9% of their gambling tax revenue on problem gambling initiatives.

As the debate unfolds in Washington, sports betting is on the rise. This year, Wall Street expects DraftKings to generate $6.3 billion in revenue, up from $432 million in 2019. It operates sports books in 25 states, plus the District of Columbia.

Rival FanDuel, owned by U.K.-based Flutter Entertainment , is forecast to have sales of $16.9 billion this year, up from 2019’s $2.8 billion. It’s in 22 U.S. states and D.C.

The stocks have been smart bets. DraftKings shares are up 156% over the past three years, while Flutter has risen 108%. The S&P 500 index has gained 48% over the same period.

FanDuel says it hasn’t conducted lobbying activities around the GRIT Act. “FanDuel is an industry leader in responsible gaming,” a company spokesperson says. “We are also highly supportive of gaming tax funds being used for responsible gaming research and consumer protection in many of the states in which we operate.”

DraftKings didn’t respond to requests for comment.

Without federal oversight of gambling, states have been left to fend for themselves, particularly when it comes to public health. “There’s no playbook,” says Jeff Marotta, a clinical psychologist who has spent three decades consulting with states to develop problem gambling services.

While states are gradually increasing their problem gambling budgets, the work has been slow. As of 2024, the median state funding level for problem gambling was $1.9 million, according to a survey Marotta conducted for the National Association of Administrators for Disordered Gambling Services. Massachusetts is a standout with a $30 million problem gambling budget, while eight states provide no funding at all.

The challenge for policymakers trying to regulate gambling is its almost magical benefits to state coffers.

Gambling is “a very effective way to get more state budget without having to raise taxes,” says Heather Wardle, a professor of gambling research and policy at the University of Glasgow. Once gambling revenue is supporting pension funds, infrastructure, and other state priorities, Wardle says, “it’s very hard to then roll back from that.”

In Kentucky, Stone’s problem gambling council dealt with that challenge for years. “We would be taking money away from some other program,” Stone says state legislators regularly told him.

The dynamic was a topic in last year’s Commission on Gambling, organized by the Lancet, the international medical journal. “While governments readily appreciate revenues from the gambling industry and might even use gambling products for their own fund-raising purposes, they generally underestimate the prevalence and seriousness of social harm done and the associated public costs,” the commission reported.

To Kentucky lawmakers, though, their citizens were already facing gambling’s harm. As of 2023, sports betting was legal in most of its neighboring states, meaning Ohio, Illinois, and Virginia were generating gambling revenue off Kentuckians. “So why forgo that revenue when the ills already come with it?” says state Rep. Michael Meredith, who sponsored the bill to legalize sports betting in Kentucky.

It was a winning argument—but maybe not for the state’s public health.

“That can’t be a healthy system, particularly when we know that the way the industry generates its profits is disproportionately relying on those who are harmed,” says Wardle, who co-chaired the Lancet’s project.

A study in the Journal of Gambling Business and Economics found that 5.7% of U.S. sports bettors generate 80% of sports betting revenue. That ratio roughly holds across sales in the alcohol, tobacco, and marijuana industries. Researchers say this “addiction surplus” has motivated industry players to prevent public-health initiatives tied to reducing consumption.

Across the country, the programs that do exist have often been met with little interest, Marotta says, because of a dated approach.

“The place where states really struggle is they equate the needs to address gambling issues among their population like they do with other addiction issues or mental health issues,” he says. Problem gambling treatment is “a different business model.”

Promoting the treatment is as important as the treatment itself, Marotta argues. “These folks that have gambling issues don’t tend to just show up for treatment,” he says. “So there needs to be an effort to be more proactive and go out there and do outreach and market your services.”

Until then, the programs are stuck in a continual effort to get off the ground with disappointing impact. In the end, Marotta says, policymakers “don’t see the numbers they expect, they reduce the funding or they gut the program.”

In 2019, Washington, D.C., allocated $200,000 to problem gambling initiatives when it approved sports betting in the District. Four years later, gambling tax revenue reached $5.4 million and D.C. cut its problem gambling budget to zero.

The market’s long M&A winter could finally be about to thaw. It’s good news for investment-banking stocks.

This was supposed to be a great year for mergers and acquisitions. Investors believed President Donald Trump’s deregulatory bent would unleash a torrent of deals that had been blocked by concern over how the Biden administration might react.

So far, it hasn’t worked out that way, in large part because Trump’s tariffs threw markets into chaos. Corporate executives scrambling to deal with the fallout put big decisions like merger deals on hold.

Now, things finally seem to be getting back to normal. Trump moderated his tariff program, including a recent deal to slash levies on Chinese imports for 90 days while the two countries work out their differences.

The past week has brought a handful of headline-making announcements. Friday morning, the cable company Charter Communications said it planned to buy Cox Communications in a deal that valued its privately held rival at $34.5 billion. Thursday, Dick’s Sporting Goods disclosed an agreement to acquire Foot Locker for $2.4 billion. And earlier in the week, the online brokerage Robinhood said it would purchase WonderFi, a Canadian digital asset company, for 250 million Canadian dollars, or about $179 million.

Republicans’ $3.7 trillion tax bill, currently winding its way through Congress, could give merger activity another boost. New legislation, an update of the 2017 Tax Cuts and Jobs Act, would help reduce uncertainty, especially because many provisions of the original bill are set to expire at the end of the year.

Some specific provisions of the new bill could also help directly. In a note Friday, Wolfe Research analyst Chris Senyek said current versions may allow companies to immediately claim depreciation expenses on newly-acquired equipment, restoring a popular feature of the 2017 bill that had been phasing out. “This would favor buying tangible asset heavy businesses,” Senyek wrote. “If passed into law, we expect M&A activity to accelerate in a similar manner to 2018.”

Hope for a potential M&A revival, and disappointment that prospects for one seemed to be fading, have sent financial services stocks on a roller-coaster ride. The Invesco KBW Bank ETF, an exchange-traded fund that tracks the sector, gained more than 15% between the start of November and Feb. 19, the day the market reached its record high, compared with a gain of just 7% for the S&P 500.

But those stocks have struggled since then as Trump’s tariff agenda overshadowed other priorities like deregulation and tax cuts. In the past three months, the bank ETF has fallen more than 7%, compared with 3.4% for the overall market.

Major banks like JPMorgan Chase, Goldman Sachs, and Morgan Stanley would all be beneficiaries from a merger boom. But smaller names such as Lazard, Evercore, and Moelis, which represent something much closer to a pure play on the investment banking industry, could be bigger winners.

Shares of Evercore are down about 12% year to date, despite having rallied more than 30% in the past month. Just how tied is Evercore to the lackluster M&A space?

In the bank’s latest quarterly earnings presentation, executives included a slide bragging that only about 60% of its revenue in the past five years came from advising on M&A deals. They said that during the first quarter, it had been less than 50%.

Evercore investors may indeed have felt reassured the company was diversifying its revenue sources away from M&A. But they would probably a lot happier if the merger market just picked up.

It may be a small world, after all—but not on Wall Street, where small-cap stocks continue to lag the broader market. The Russell 2000

and S&P Small Cap 600 indexes are down 8.3% and 9.5% in 2025, while the S&P 500 is roughly flat.

Still, both small-cap indexes have gained nearly 20% from the 52-week lows they hit just after Liberation Day. Hopes are growing that the Trump administration will focus more on domestic economic stimulus, such as extending tax cuts and deregulation, and less on tariffs and trade. That should be good news for smaller U.S. companies.

It also doesn’t hurt that small-caps continue to look very cheap compared with their megacap brethren. The S&P 600 trades for less than 16 times 2025 earnings forecasts, compared with a price/earnings ratio of more than 22 for the S&P 500. That’s a bigger-than-usual discount.

Tim Skiendzielewski, a portfolio manager at Rockefeller Asset Management, says small-cap valuations remain unreasonably depressed, especially if investors are underestimating the potential for earnings growth to accelerate. Analysts are now forecasting a 20% jump in earnings per share for the S&P Small Cap 600 in 2026, and that could be just the start of several years of strong growth. More merger activity —combined with hopes for increased infrastructure spending from Washington—should also boost small-caps, says Skiendzielewski, who thinks industrials, tech, and financial stocks should be the biggest winners from these trends.

More easing from the Federal Reserve, which the market is pricing in for later this year, would also give small-caps a lift. That’s because many of the stocks rely on floating-rate debt to fund growth. Lower short-term rates would give these companies a boost. “Small-caps are very sensitive to interest rates,” says Peter Roy, a portfolio manager at Argent Capital, which runs the actively managed Argent Focused Small Cap exchange-traded fund. “Fed cuts could help.”

Look no further than the housing market, which could get a lift from lower interest rates, especially if construction activity increases, says Roy. “There is a chronic undersupply of homes,” he says. “Housing starts are not keeping up with demand and people with low mortgage rates are staying in existing homes longer.” He owns Green Brick Partners, a land developer building new homes in suburban areas, Champion Homes, a manufactured-home builder, and UFP Industries, a supplier of wood and composite decking.

Others are looking away from economically sensitive areas to those that can grow no matter the environment. Randy Gwirtzman, a portfolio manager at Baron Capital, points to small-cap defense and cybersecurity stocks as attractive in light of plans for increased military spending in the U.S. He owns missile defense companies Mercury Systems and Karman Holdings, which could benefit from Trump’s Golden Dome plans, as well as unmanned drone maker Kratos Defense & Security Solutions and cybersecurity companies CyberArk and SentinelOne, in the Baron Discovery fund. “Investors are underallocated to small-caps and should be investing in secular growth,” Gwirtzman said.

But looking for profitable companies is key, particularly as bond yields spike. Analysts at 22V Research noted in a recent report that going “long quality [and] short unprofitable small-caps is a pure representation of the ‘rates are too high’ trade.” Argent’s Roy acknowledged that a significant chunk of companies in the Russell 2000 are unprofitable. He only invests in ones that are making money. “That culls our investible universe pretty quickly,” he said.

Why did dire headlines and market surprise accompany Moody’s recent downgrade of its U.S. credit rating, when the facts leading to the firm’s decision have been well-known for years? Like the proverbial slow-boiled frog, the challenges associated with America’s aging demographics and growing debt levels have been building for decades. Are markets only now waking up to the uncomfortable and uncertain fiscal outlook?

Some confusion is understandable, even if the stakes seem clear. We will need to solve the mismatch between government revenue and spending, but whether that is easier or more difficult is an open question. There are two highly probable paths ahead for the U.S., and we don’t yet know which one we will follow.

On one hand, my team at Vanguard estimates there is about a 40% chance that the unchecked fiscal dynamic will result in an extended period of stubborn inflation and higher interest rates, akin to a milder 1970s. In that scenario, stocks would lag behind bonds, and interest rates could climb above 7%. A slowing economy would leave millions of Americans poorer. On this path, we estimate 20% odds that the 10-year Treasury yield (a benchmark for mortgage rates) is above 9%, or twice the current rate.

On the other hand, we also estimate there is close to a 50% chance that technology, especially artificial intelligence, could unlock productivity at scale, enabling greater growth and tax revenue offsetting some of these headwinds. In either case, we are highly likely to see the end of the status quo of stable growth, inflation, and financial returns.

These probabilities are, of course, imprecise. But they draw on a unique quantitative framework that Vanguard has developed, based on decades of research, to provide a sense of the most likely economic scenarios through 2035, driven by an interplay of factors: technology, demographics, globalization, and fiscal debt—so-called megatrends. The goal is to help investors prepare for the most likely outcomes. Probability estimates help clarify how we think about the long-term outlook, so we don’t get bogged down in today’s headlines or paralysis of analysis.

Our framework suggests that the 2030s will be shaped by a tug of war between technology as a source of growth, and age-related spending deficits as a source of weakness. Two likely scenarios emerge.

Scenario one: Productivity surges (45% to 55% probability). AI continues to advance at an increasingly faster pace and becomes a general-purpose technology, like electricity. By the first half of the 2030s, AI has raised productivity more than the personal computer and the internet. It eventually sparks transformative knock-on effects, new industries, and significant job displacement. Technology keeps inflation in check, and deficits cease to climb given higher tax revenue from stronger growth. A surge in innovation occurs thanks to more work automation and task augmentation. Costs of living are somewhat more manageable. Standards of living for the average American household double every 30 years, not every 70.

Scenario two: Deficits drag (30% to 40% probability). AI disappoints, failing to live up to the hype. Worker productivity remains sluggish due to a continued lack of augmentation and automation. Meanwhile, government deficits keep climbing. Government spending remains indefinitely higher than revenue, requiring higher borrowing, and this structural deficit raises borrowing costs. Credit slows. Home prices either fall, homeownership moves more out of reach, or both. U.S. growth becomes less exceptional and more European. Based on current prices, financial markets are unprepared for this outcome—so declining prices and increasing volatility is a new trend. Deficits raise inflation expectations, making inflation stubborn. The acceleration of price increases makes the average worker’s standard of living lower than their parents’.

On one side is the possibility of technology-fueled economic growth. On the other, we have the near-certain weight of fiscal deficits, aging demographics, and rising borrowing costs. Which side wins will affect generations to come. Will AI deliver a surge in productivity even close to what electricity did 100 years ago?

Investors should plan for two future paths, not one. The “productivity surges” and “deficits drag” scenarios aren’t just possibilities, but meaningful probabilities. Together, our framework estimates the chance of one of these two forecasts occurring is greater than 80%. As investors, we need to consider portfolios that are prepared for both scenarios. The goal is to narrow the range of future outcomes and better manage risk.

If AI becomes a true general-purpose technology, the U.S. could experience a rare “best of both worlds” scenario where positive economic trends open a window for policymakers to enact pre-emptive and even gradually phased-in fiscal reform. But, critically, even if AI’s promise is realized, it only buys time. Without meaningful fiscal reform, economic growth will eventually decline.

If technology and AI disappoint, the era of tough choices will arrive sooner than markets might think. Investors can try to prepare, by shifting a greater allocation to bonds and a diversified set of value stocks, but policymakers are the key. They can control the path of the structural deficits far more than they can guarantee and harness transformative productivity gains. They have significant work to do because the water is getting warmer.

Healthcare stocks have been performing so badly for so long, it’s hard to tell whether they need a doctor or a mortician. They may finally be on the verge of a revival.

Down 5.1% so far this year, the Health Care Select Sector SPDR exchange-traded fund has been running neck and neck with energy and consumer discretionary for the worst sector of 2025. The S&P, for its part, is down just 0.3%. It’s not hard to see why. The sector has been hurt by Donald Trump’s decision to name Robert F. Kennedy Jr. —no fan of traditional science-based medicine—to head Health and Human Services and Marty Makary —more a devotee of science but no less a skeptic of the pharmaceutical industry—to head the Food and Drug Administration; by the collapse of UnitedHealth Group stock, once the sector’s largest, under the sheer weight of bad business decisions and scandals; and continued scrutiny of Medicare and drug pricing, among other initiatives.

Healthcare’s bad run isn’t just a 2025 phenomenon. The Health Care Select Sector SPDR has underperformed the SPDR S&P 500

SPY by 9.1 percentage points annualized over the past five years and fallen short of the benchmark in four of the past five calendar years. Clearly, more than Trump is weighing on the sector. Regulatory uncertainty, pandemic-related disruptions, and lack of innovation outside of fat-burning GLP-1s have contributed to the view that the sector is anything but a must-own.

Sometimes, though, these sentiment shifts get too extreme—and now may be one of those moments. One way market technicians try to compare indexes is by looking at the change in the ratio of one to the other. Jason Goepfert, founder and senior research analyst at SentimenTrader, notes that the ratio of the price of the healthcare index relative to the S&P 500 fell more than 35% from its most recent high, something that had only occurred seven times before over the past 100 years. That type of relative decline has typically been a good time to buy the sector, which has averaged a return of 17% over the subsequent 12 months.

But wait, there’s more. The Health Care ETF traded at a new 52-week low on May 15 before rallying to finish the day above the previous day’s high. That, too, is a rare occurrence—it’s happened just four other times since the ETF’s inception in 2000. Once again, returns have been quite good. The ETF has averaged a 21% rise over the 12 months following the signal, according to SentimenTrader data, including a 46% rise after getting triggered in 2009. That, too, suggests the sector is oversold and primed for a rally. “Trends in the sector are so bad that they indicate washout conditions, and investors seem to sense snapback potential,” Goepfert writes.

Insiders, however, are taking the long view. Goepfert notes that they’ve been scooping up shares of beaten-up UnitedHealth and Humana, among others, with the buying outpacing selling. That, too, has been a good sign for returns. “The increasing pace of buying among insiders in the sector further confirms that those who should know best have confidence in a potential recovery,” he writes.

Not everyone is convinced. Earlier this month, Savita Subramanian, head of U.S. equity and quantitative strategy at BofA Securities, noted that the sector had become increasingly tied to the market environment, with about 70% of the price returns over the past five years explained by macro forces. The sector has also gotten riskier, with earnings-per-share volatility now close to the same as the overall market’s, margins that have been shrinking, and debt that has been rising.

The only thing it really has going for it is valuation—biotech stocks are cheaper than growth peers in the tech sector, and pharmaceutical stocks trade at a discount to defensive consumer staples. While the group ranks No. 2 in BofA’s short-term sector model, it remains an underweight in its S&P 500 weightings.

Still, Subramanian highlighted six healthcare stocks that could be worth a look: drug distributor Cardinal Health, CVS Health, Eli Lilly, health insurer Cigna Group, Danaher, and Thermo Fisher Scientific.

Those seem like decent choices, but we’d highlight one of our own: Gilead Sciences.

Gilead has been stuck in no-man’s-land since it came up with a cure for hepatitis C, which was approved in 2013. But a controversy over cost and almost immediate competition from AbbVie and others caused the stock to peak in 2015. It’s been range-bound ever since. Gilead, however, is now near the top of its range, and tantalizingly close to a breakout. The next catalyst could be its HIV treatment lenacapavir, which is awaiting FDA approval. It’s injected twice a year, rather than being a pill taken every day, which Jefferies analyst Michael Yee says could be attractive to current patients.

A decision should come by June 19, though there are worries that the approval will get held up. Yee doesn’t think it will. “[Management] has been in good dialogue [with the] FDA and we’re weeks away and the drug has Breakthrough Therapy designation,” he explains. “We see a [potential] strong launch into 2026 and numbers going up.” His price target of $130—14 times 2026 earnings of $9 a share—suggests shares could gain 22% from a recent $106.51.

That’ll put a spring in your step.