Dear Friends,
2025 has been an exciting year, and the markets have continued to perform well. All three major indexes delivered strong positive returns for the third year in a row. The largest driver of growth, this year, has been the artificial intelligence trade. Large technology companies have invested hundreds of billions of dollars into this area, with more investment projected for 2026 and beyond. Investment in AI infrastructure has created wealth across the country, with utilities and industrials benefiting from the need to construct more data centers. We expect growth in AI spending to continue to diffuse to other sectors of the economy in 2026, with a broader range of stocks outperforming the general market.
Outside of AI, the two other headlines that we feel impacted the economy the most this year were the Trump Administration’s tariffs and the Federal Reserve’s rate cuts. After Trump was elected, investors anticipated a shift in international trade policy. The liberation day tariffs that President Trump announced in April spooked the market, and we saw a decline in equity prices. The administration eventually pulled back its initial tariff plan and settled on much more reasonable import taxes. The long-term effects of these tariffs have yet to be seen, but so far, they have not substantially impacted inflation, as was initially feared. The Federal Reserve was highly skeptical of tariff impacts earlier this year, so it waited to cut rates until September. In total, there have been three rate cuts this year, totaling 75 basis points. We think all of these were necessary, as the labor market has been starting to show signs of weakness. Overall, we still think the core of the US economy is strong, and we are expecting the economy to continue growing in 2026.
We are very excited for 2026 and think there are ample investment opportunities that we are looking to take advantage of. For equities, we are going into 2026 with a blend of value and growth investments. We also think tactical investments into thematic areas, like cybersecurity, will give us a chance to outperform in the long term. With interest rates coming down over the past few months, it is more difficult to get strong yields without taking on additional risk. We think that actively managed income funds provide an excellent balance of risk and reward. We are excited to start the new year, and we will continue doing everything we can to provide you with the best returns for the lowest amount of risk.
The following are our best current recommendations:
2025 has been an exciting year, and the markets have continued to perform well. All three major indexes delivered strong positive returns for the third year in a row. The largest driver of growth, this year, has been the artificial intelligence trade. Large technology companies have invested hundreds of billions of dollars into this area, with more investment projected for 2026 and beyond. Investment in AI infrastructure has created wealth across the country, with utilities and industrials benefiting from the need to construct more data centers. We expect growth in AI spending to continue to diffuse to other sectors of the economy in 2026, with a broader range of stocks outperforming the general market.
Outside of AI, the two other headlines that we feel impacted the economy the most this year were the Trump Administration’s tariffs and the Federal Reserve’s rate cuts. After Trump was elected, investors anticipated a shift in international trade policy. The liberation day tariffs that President Trump announced in April spooked the market, and we saw a decline in equity prices. The administration eventually pulled back its initial tariff plan and settled on much more reasonable import taxes. The long-term effects of these tariffs have yet to be seen, but so far, they have not substantially impacted inflation, as was initially feared. The Federal Reserve was highly skeptical of tariff impacts earlier this year, so it waited to cut rates until September. In total, there have been three rate cuts this year, totaling 75 basis points. We think all of these were necessary, as the labor market has been starting to show signs of weakness. Overall, we still think the core of the US economy is strong, and we are expecting the economy to continue growing in 2026.
We are very excited for 2026 and think there are ample investment opportunities that we are looking to take advantage of. For equities, we are going into 2026 with a blend of value and growth investments. We also think tactical investments into thematic areas, like cybersecurity, will give us a chance to outperform in the long term. With interest rates coming down over the past few months, it is more difficult to get strong yields without taking on additional risk. We think that actively managed income funds provide an excellent balance of risk and reward. We are excited to start the new year, and we will continue doing everything we can to provide you with the best returns for the lowest amount of risk.
The following are our best current recommendations:
HARE Portfolio
(Growth Companies)
Meta Platforms Inc (META)
Meta is the largest social media company in the world, with nearly 4 billion monthly active users across all of its platforms. META owns Facebook, Instagram, Messenger, and WhatsApp. While these platforms are generally free for users, META generates revenue through advertising. No other company has the social reach that META does, and it has strong pricing power because of this. Its advertising algorithm is exceptional, and it has created the perfect formula to get the most out of its users. We think online advertising will continue to grow, as users continue to depend on social media apps to connect with the world. META is also investing in AI, with its Llama chatbot. While Llama is accessible across its social media platform, it has yet to meaningfully contribute to revenue growth. Long-term, we expect that META will be able to use AI tools to better match advertisers with customers, which will lead to higher revenue. META’s scale is unparalleled, which gives it a wide moat rating from Morningstar. A wide moat rating indicates that a company has built a 20-year competitive advantage over most of its competitors. META is expected to grow its revenue by 14% compounded annually. META has also expanded margins by nearly 17% over the past two years. We feel that META is uniquely positioned to take advantage of both current and future growth trends.
Key Financial Information
Stock Price
$663.20
Fair Value Calculation
$850.00
Potential Gain
28.16%
Morningstar Rating
4 Stars
CFRA Rating
Strong Buy
Argus Comp Rating
Buy
Schwab Equity Rating
B
TORTOISE Portfolio
(Dividend Paying Companies with a Stable Business Model)
Evergy Inc. (EVRG)
Evergy Inc. is a regulated utilities company that supplies energy to parts of Missouri and Kansas. EVRG operates in an environment constructive for growth, and Morningstar estimates that earnings could grow by up to 7% annually. 7% growth is exceptional for regulated utility companies in the US. Evergy has the chance to overperform because a high number of data centers are being built in its coverage area. Increased demand for electricity will allow EVRG to make excess profits over the next five years. EVRG has been assigned a narrow moat rating by Morningstar due to its scale and grid presence in both Missouri and Kansas. A narrow moat rating indicates that a company has built a 10-year competitive advantage over most of its competitors. EVRG has increased its dividend by at least 5% annually, and this is a trend we expect to continue. We believe that Evergy will take advantage of a strong environment and an increase in demand for efficient energy. EVRG currently pays a dividend yield of 3.82%.
Key Financial Information
Stock Price
$73.05
Fair Value Calculation
$78.00
Potential Gain
6.77%
Forward Dividend
3.82%
Morningstar Rating
3 Stars
CFRA Rating
Hold
Argus Comp Rating
Buy
Schwab Equity Rating
C
Growth ETF Pick of the Month
First Trust RBA Industrial Renaissance ETF (AIRR)
First Trust’s Industrial Renaissance ETF is a tactical strategy designed to take advantage of companies' investment in American Infrastructure. AIRR holds about 50 individual stocks. 90% of holdings are in the industrials sector, with the remaining 10% falling into the financial services sector. There is a long-term focus on re-shoring industrial production in the US, as many companies have become too dependent on foreign manufacturing. AIRR is overweight mid-cap companies, which adds some risk but also gives us room for future growth. We think that AIRR can outperform if US manufacturing continues to be a long-term focus for the US.
Top 10 Holdings
Holdings
Portfolio Weighting
Morningstar Rating
C.H. Robinson Worldwide Inc
4.49%
1 Star
Comfort Systems USA Inc
4.02%
3 Stars
MasTec Inc
3.80%
2 Stars
Huntington Ingalls Industries
3.72%
3 Stars
Kirby Corp
3.51%
5 Stars
Saia Inc
3.45%
2 Stars
F N B Corp
3.33%
3 Stars
Emcor Group Inc
3.24%
1 Star
Core & Main Inc Class A
3.23%
3 Stars
Dycom Industries Inc
3.06%
2 Stars
Key Financial Information
Current Price
$100.56
1 Year Performance
28.91%
3 Year Performance
32%
5 Year Performance
24.65%
Morningstar Rating
5 Stars
Expense Ratio
0.70%
Fixed Income ETF Pick of the Month
BlackRock Flexible Income ETF (BINC)
BlackRock’s Flexible Income ETF is an actively managed fund that is designed to overperform the risk-free rate in any environment. BINC is highly adaptable and is invested across multiple sectors, with securitized investments and corporate bonds leading the way. BINC is exposed to high-yield investments, too, with about 20% of holdings rated below investment grade. The management team behind BINC has an excellent track record, and we are comfortable investing in their funds long-term.
Top 10 Holdings
Holdings
Portfolio Weighting
Federal National Mortgage Association
8.92%
Federal National Mortgage Association
2.84%
ICE, CDX.NA
0.95%
Spain (Kingdom of)
0.51%
Ireland (Republic of)
0.51%
Secretaria Do Tesouro Nacional
0.45%
Italy (Republic of)
0.41%
Thailand (Kingdom of)
0.40%
Federal National Mortgage Association
0.37%
Secretaria Do Tesouro Nacional
0.37%
Key Financial Information
Current Price
$52.80
1 Year Performance
7.47%
3 Year Performance
N/A
5 Year Performance
N/A
Morningstar Rating
NR
Expense Ratio
0.40%
Yield
5.13%
Bond Picks of the Month
John Deere Capital Corp
Yield
3.817%
Maturity
1/8/2027
Rating
A
PACCAR Financial Group
Yield
3.815%
Maturity
1/31/2029
Rating
A+
Mercedes Benz North
Yield
4.286%
Maturity
1/18/2031
Rating
A
CDs
Goldman Sachs – 1 Year CD
3.55%
Goldman Sachs – 3 Year CD
3.70%
Morgan Stanley – 5 Year CD
3.80%
Author's Perspective
Coming off a strong 2025, we think growth has a chance to continue to deliver strong returns. If investment in AI infrastructure and data centers continues, the economy will keep growing. As AI grows, more companies will use it, and they will get cost savings from increased efficiency. Our only concern is that if the companies spending billions on AI don’t see better returns over the next few years, they could pull back on their investments, which would shock the system. Over the first nine months of 2025, it is estimated that AI spending made up 37% of GDP growth. If AI spending were to decrease, our economy could see much more limited growth. We do not foresee a cut in AI spending, as the largest players in the sector have seen strong growth in several AI-related areas, but it is a concern worth noting. We are excited to see what the new year brings, and are always staying adaptable and informed so we can best deal with evolving environments.
As always, if you have any investment questions, please do not hesitate to contact us and we will be happy to assist.
As always, if you have any investment questions, please do not hesitate to contact us and we will be happy to assist.
Yours Truly,
Alan Locke, President
Locke Investment Management
Alan Locke, President
Locke Investment Management
About Alan Locke
Alan Locke, BS, MBA, CGA, CFP is the President of Locke Investment Management. After a successful financial management career, Mr. Locke founded Locke Investment Management, a registered investment advisory firm, in 1994. His credo has always been to build the best possible portfolio for each client in order to help that client achieve his or her financial goals.