Daily Posts Archive

Everyone is focused on when the Fed will raise interest rates. But there are far more important issues that could affect your portfolio in the coming months.

With the bottoms of August and September behind us—and fear rekindled among numerous investors—is it possible that the market will continue to motor higher from here, possibly all the way to year-end? Yes, it is possible. But more likely—in part because it’s getting late in the year—is that any advance will be led by some fairly narrow groups of stocks, possibly featuring two distinct categories of stocks.

There was a lot of anxiety in August and September. And the market uncertainty manifested into a pretty steep decline across global markets. My favorite asset class, small caps, was far from immune to the weakness. But like waves on the ocean, the market moves in cycles over time, and long-term performance is improved by buying in troughs, not at crests. That’s why I recently increased the size of a few long-term positions in my personal small-cap portfolio, and advised Cabot Small-Cap Confidential subscribers to do the same.

The good news for growth investors is that we have a new buy signal. (But it doesn’t mean that markets are out of the woods.)

This strategy involves the selling of a call at a lower strike price, while simultaneously buying a call at a higher strike price. The maximum profit on this strategy is the premium you collect. The maximum loss is the difference between the strikes, minus the premium you collect.

Recent weeks have brought an abnormally high number of days when the Dow gained or lost 200 or more points, as the overwhelming majority of stocks joined in the trend of the day. What do I think about this volatility, and what does it mean for the future?