The 2025 stock market sell-off could be a rare opportunity for second income investors

The 2025 stock market sell-off has rattled investors worldwide. Major indexes, including the FTSE 100 and S&P 500, plunged 4%-5% on multiple days and many stocks now down 20% or more from their 52-week highs. 

This was all triggered by Trump’s aggressive tariff policies and escalating global trade tensions. The sell-off has become the largest market decline since the Covid-19 crash of 2020.

However, while the volatility and uncertainty are unsettling, history suggests that such rare market events can present exceptional opportunities for long-term and second income investors.

But what makes this sell-off different? Well, it’s fair to say that uncertainty is rife. This year’s downturn was sparked by sweeping US tariffs that led to panic selling and a sharp spike in volatility.

Investors initially fled to bonds, but even those markets became unstable as yields surged, reflecting a loss of confidence in US fiscal policy and fears of rising inflation. While the immediate outlook remains uncertain, these conditions have driven down share prices across sectors, including many reliable dividend payers.

A window for second income seekers

Investing during market turmoil is never easy, but history shows that those who buy when fear is high and valuations are depressed can reap significant rewards over time. While a full recovery may take months or even years, global markets have always bounced back from past crises.

Periods of indiscriminate selling often result in quality income stocks trading at attractive valuations. However, the market’s really mixed and we have seen some investors search for shelter in UK-listed dividend stocks. US income stocks however, do appear harder hit. This could be a rare opportunity.

One stock to watch

Nordic American Tankers (NYSE:NAT) stands out as an intriguing second income prospect in 2025. Like many of its peers, the share price has shown weakness in recent months. In fact, over the past year, Nordic’s stock has dropped 35% amid weaker demand and normalising charter rates.

In Q4, earnings per share came in at just $0.01 and revenue missed expectations by $5m. This marks the end of an unusually strong period for tanker operators, as spot TCE (Time Charter Equivalent) rates have fallen sharply from last year’s highs — this had been driven by geopolitical disruptions that have since eased.

However, Nordic American’s appeal for income investors lies in its robust dividend outlook. Analysts forecast a forward yield of 9.4% for 2025, rising to 14.7% and 17.2% in the following years. This is supported by a tight global supply of younger Suezmax tankers and limited shipyard capacity for new builds. The company’s expanding fleet — now 21 vessels — also positions it to benefit if spot rates rebound, and insider buying signals management’s confidence.

Yet risks are significant. The company’s heavy spot market exposure and high debt — net debt at $210m and a debt/equity ratio of 0.53 — make it vulnerable to further rate declines and market volatility. Additionally, the company’s declining book value and slow fleet renewal raise questions about long-term capital management.

In short, for second income seekers, Nordic American offers high yield potential, but this comes with elevated risk and cyclical exposure. It’s one that I personally find very interesting. However, I’ll keep my powder dry for now.

The post The 2025 stock market sell-off could be a rare opportunity for second income investors appeared first on The Motley Fool UK.

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James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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