Money & Megatrends

December 1, 2025

By Brian Hunt

Inside today’s issue:

Small-cap stocks are poised for a major upside breakout
Brazil reaches new highs and confirms the critical resources uptrend
The AI-fueled natural gas trade nears a major upside breakout
Making money in metals: Gold, silver, and copper stocks power to new highs

Small-Caps Are Poised for a Major Upside Breakout

Who is going to deliver lower interest rates in 2026?

On Sunday, President Trump told reporters he knows who will; He has picked the next Federal Reserve Chair. “I know who I am going to pick, yeah,” Trump told reporters on Air Force One. An announcement is imminent.

Lower rates are key for one of the market’s highest potential trades over the next 12 months: Long small-cap stocks.

On October 15, I highlighted the bullish price action in small-cap stocks and suggested it was time to add a position there.

Small-cap bulls argue these stocks have underperformed large caps because high interest rates and high inflation have a greater impact on smaller companies than on larger companies. This underperformance has left small caps relatively cheap, trading at a forward P/E ratio of 15, compared to the S&P’s 22.4.

If Donald Trump gets his wish for lower interest rates, however, small caps could become much less cheap. Lower rates should benefit small-cap stocks more than large-cap stocks. Trump’s new Fed Chair – who will take over in May 2026 – is virtually guaranteed to deliver those lower rates.

In my original note, I mentioned that the small-cap-focused iShares Russell 2000 ETF (IWM) had reached a new 1-year high. Since then, IWM has zigged and zagged, making little progress.

This is a good time to break out Nicolas Darvas-style “box” analysis of small caps…

Nicolas Darvas was a great trader of the 1950s. He wrote the excellent book How I Made $2 Million in the Stock Market, published in 1960. Darvas made a fortune by trading leading growth stocks. He looked for companies with strong growth potential whose shares were trading in sideways consolidation patterns.

Darvas called this sideways trading pattern a “box.” You could draw the top and bottom of the box on a chart to see it.

When a stock was trading inside a box, Darvas would avoid it. The stock had no momentum. When it broke out of the box to the upside, he would buy it and look to ride the upward swing.

If the stock continued its upward trajectory, he would hold the position. If the stock dipped and went back into the box, Darvas would sell it.

The idea is to make more on the winners than you lose on the losers. Rinse and repeat and make a lot of money.

This simple but powerful strategy – focused on making a lot when you’re right and losing a little when you’re wrong – made Darvas millions of dollars in the 1950s… back when $2 million was a lot of money.

As you can see, IWM has traded in the $230 – $250 range over the past two months. Last week, IWM rallied close to its breakout point. A break above $250 per share means the small-cap bull market is on.

Small caps near a major upside breakout

Brazil Reaches New Highs: Critical Resources Remain an Area of Opportunity

We are officially in a bull market for critical resource investments. For proof, see the recent new high in Brazilian stocks.

Over the past three months, I’ve made the case that we are in a favorable environment for critical resources … one in which many individual resource sectors will generate strong returns.

Critical resources are the building blocks of the economy. Think raw materials like crude oil, natural gas, iron ore, copper, corn, and cotton.

Mining, extracting, planting, harvesting, processing, refining, and transporting these critical resources is a multi-trillion-dollar business that drives the economy.

When technology stocks are soaring, it’s easy to forget about commodities as an asset class. But when commodities enter an uptrend, it tends to create extraordinary wealth-building opportunities. We are in the early innings of one such uptrend.

For many professional investors, Brazil is a preferred way to play commodities in the stock market. Brazil is the world’s largest producer of soybeans, sugar, and coffee. It’s a major producer of cattle, cotton, corn, and orange juice. It’s a major producer of iron ore and crude oil.

Given all this, Brazil’s economy is closely tied to the commodities sector. Its stock market tends to rise and fall with resource prices. Brazil is one of my ultimate “weathervanes” in the critical resource investing world.

As you can see from the 1-year chart of the iShares Brazil ETF (EWZ), Brazil is breaking out to new highs and is in a clear uptrend. The “trend tailwinds” are blowing in the critical resource world. It’s time to be long.

A key critical resources market powers to a new high

This Off-the-Radar AI Power Bet Is Poised to Run Higher

In this favorable climate for critical resource investments, our natural gas trade is poised to do well.

On October 2^nd, I introduced investing in natural gas stocks as a way to benefit from AI’s soaring demand for electric power.

The bull case for natural gas and AI goes like this: To support its huge AI ambitions, big tech is poised to build dozens upon dozens of power-hungry data centers over the next five years. This will drive increased demand for natural gas, which is the preferred clean-burning fuel for power plants that supply electricity to data centers. Growing European demand for U.S. natural gas exports (to be less dependent on Russia) is also poised to be a significant natural gas demand driver.

With this backdrop in mind, some of the world’s most informed hedge funds have taken positions in major American natural gas producers, including EQT (EQT), Range Resources (RRC), Antero Resources (AR), and Expand Energy (EXE). These stocks could double, then triple, over the coming years as AI and European demand act as strong consumption drivers.

As you can see from the chart below, the market is starting to like this trade. Shares of giant natural gas producer EQT have rallied 17% over the past month and are poised to break out to new all-time highs. The charts of the other natural gas names look similar. I expect this trend to be your friend over the next 12 months.

Natural gas producer EQT is poised to break out

Market Notes

The gold mining sector is enjoying a strong start to the week. Gold miners reaching new 1-year highs today include
Equinox Gold (EQX), Kinross Gold (KGC), Barrick Mining (B), Iamgold (IAG), Orla Mining (ORLA), and
I-80 Gold (IAUX).
Over the past few weeks, we’ve highlighted how the copper mining sector was approaching a major upside breakout. Today, the
Global X Copper Miners ETF (COPX) climbed 2.35% to reach a new 1-year high.
On March 13, we sent a note that highlighted the upside breakout in silver and urged people to see this trend as your friend.
Silver has increased by 71% since then. The metal reached a multi-year high today.
Mega retailer Walmart (WMT) reached a new all-time high today.
The world’s largest publicly traded steelmaker – ArcelorMittal (MT) – reached a new all-time high today.

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