Stocks have rallied so far this year on optimism that we can get through this inflation and Fed rate hiking cycle without much economic pain. That’s what seems to be happening so far. But this latest “soft landing” rally is facing a formidable foe – history.

Rate hikes almost always slow the economy. But there is typically a long lag time. Since 1961, the Fed has embarked on nine inflation-busting, rate-hiking cycles. Eight of those cycles have led to recession. The yield curve has inverted, a phenomenon that has almost always preceded a recession.

We locked in our first profit since our two losing trades back at the beginning of February, near the near-term highs for the S&P 500.


Our SPY March 17, 2023, 440/445 bear call spread that we sold for $0.63 on February 2 was only worth $0.15 after the pullback in SPY mid-week. As a result, we decided to lock in the $0.48, or 10.6%, and take all risk off the table. With over three weeks left in the trade it didn’t make sense to continue to hold on to the trade for the potential to make an additional $0.15.

As earnings season comes to a close, we still have several opportunities ahead of us.


The holiday-shortened week starts with the potential success or failure of our Home Depot (HD) trade placed late in Friday’s trading session. Due to the market closure on Monday and HD’s earnings announcement prior to the opening bell Tuesday, we needed to place a trade on Friday.

February expiration has passed and we were able to lock in 14.97% on a cumulative basis for the cycle. Three out of our four positions made a profit with GDX essentially closing out the expiration cycle at breakeven, as we only lost $0.05 on the trade.

Our cumulative total return since starting the service just over eight months ago is 64.67%.

What started out looking like another positive week for the market later turned into a week of little gains or losses, as economic data and Fed speak weighed on stocks on Thursday and Friday. For the week the S&P 500 and Dow fell marginally, while the Nasdaq rose just over 0.5%.

What started out looking like another positive week for the market later turned into a week of little gains or losses, as economic data and Fed speak weighed on stocks on Thursday and Friday. For the week the S&P 500 and Dow fell marginally, while the Nasdaq rose just over 0.5%.

In the February issue of Cabot Early Opportunities, we continue to pursue stocks offering exposure to a diversity of end markets.

Our top pick this month is a mega-cap tech company making waves with AI investments that promise to shake up one of the largest software markets in the world.

We also take a look at a small industrial company, cover two software stocks with leadership positions in their respective markets and peak at a recovering semiconductor stock.

As always, there should be something for everyone in this month’s issue!

For the first time in the new year, the market had a bad week. The declines aren’t terribly surprising or worrisome (for now), as the recent rally had been without much of a pause.

After living through 2022, we’re certainly not going to whistle past any market graveyards, so our antennae are up when it comes to the market’s recent wobble—but instead of guessing what may come, it’s best to just go with the evidence in front of you, and so far, everything looks normal. That doesn’t necessarily mean we’d be piling in here, but we continue to lean bullish. We’ll leave our Market Monitor at a level 7 today.

This week’s list is very mixed, but with the chip sector looking peppy, our Top Pick is comes from that space and also quacks like a new growth leader. The stock is extended here, but dips of a couple of points would be enticing.

An improving stock market brings our Stock of the Week portfolio to capacity, 20 stocks, with today’s addition of a fallen growth stock whose name you will almost certainly recognize. It’s a company whose business was hampered more than most during Covid, but has now returned to pre-pandemic levels – and is on track to resume its prior growth trajectory in the years ahead. And the stock is finally playing catch-up. It’s a new addition from Cabot Growth Investor Chief Analyst Mike Cintolo.

We currently have three open positions due to expire in March, all of which are leaning towards the bearish side of things. As a result, we need to add some positive deltas to the mix, which I intend to do this week. Other than that there really isn’t much to discuss at the moment since we are relatively early in the March expiration cycle.

Expiration is upon us and our positions are shaping up nicely for some decent returns. There really isn’t much to do this week with our existing positions other than just allow them to play out through expiration. That being said, I continue to scour our Income Trader watch list for new trading opportunities to add to either the Income Wheel Portfolio or the Income Trader Portfolio. Now that earnings season is nearing an end my hope is to add several positions to the mix.

Last week, we wrote about how lower quality, in both home appliances and tangible money, debases value and is a form of inflation. Today’s note includes some of our current views on inflation and capital markets, and what investors can do to help mitigate inflation’s effects on their portfolios. The goal, of course, is to protect the long-term purchasing power of investment assets.

This week’s update includes our comments on LambWeston’s (LW) earnings as well as commentary on several stocks. We had no ratings changes this week.

U.S. crude oil hit a seven-year high as stocks, especially tech stocks, face headwinds. Today I am moving dominator Taiwan Semiconductor (TSM) to a Sell as Taiwan, America, China and Japan play a dangerous game. China sent 52 warplanes into the islands air buffer zone after the U.S. and allies held exercises nearby.

So far, October has been volatile. There have been strong rallies that quickly become undone in the following days. The market is still even for the month, but it looks very unsteady.

Last week, I made the case that we may be amid a commodity bull market and that it makes sense to have a percentage of your portfolio allocated to commodity companies. Many commodities are breaking out to the upside, yet many commodity companies continue to trade incredibly cheaply.

September lived up to its bad reputation. The S&P 500 fell 4.8% for the month. But September is over. Now it’s October, which is historically only the second-worst month of the year. What now?

This week’s note includes The Catalyst Report. We encourage you to take a look at this – it is popular among many of our subscribers and unique on Wall Street.

We’re sticking with a cautious stance—selling stocks that crack, holding plenty of cash and focusing more on capital preservation until the buyers reappear.

After a delayed rection to last week’s Fed commentary Treasury yields have shot up (though they are still very low). To put it in mortgage rate terms a 30-yr. refi has gone from around 2.875% to 3.0% over the last week.

It’s been a volatile week so far, with Monday an excellent day for risk stocks and yesterday a tough day for tech as inflation fears circulated in the market.

Wednesday has witnessed some mixed action among the key metals, with liveliness in silver, weakness in copper and platinum and exceptional strength in steel.

This clothing retailer beat Wall Street’s estimates on both the top and bottom lines, posting revenues $535.6 million (up 44%), and EBITDA of $11.6 million, compared to the forecast of a loss of $5 million to $9 million.

This gold producer beat analysts’ earnings estimates by $0.02 last quarter, and four brokerage firms have boosted their EPS forecasts for the company in the last month.

This closed-end fund focuses on high-yielding debt (income).

In the past 30 days, five analysts have increased their EPS estimates for this benefits management company.

Wednesday has witnessed some mixed action among the key metals, with liveliness in silver, weakness in copper and platinum and exceptional strength in steel.

The good news this week is that the state of Connecticut appears close to marijuana legalization, as the state Senate passed legislation early Tuesday morning, with an unexpectedly close 19-17 vote. Today—the last day of the 2021 session—the bill heads to the House of Representatives, which is expected to approve it. But you never know.

This insurance company beat analysts’ earnings estimates, posting EPS of $6.11, compared to the estimate of $3.87. The shares have a current annual dividend yield of 2.38%, paid quarterly.

Earnings estimates for this auto seller have risen by 35.7% in the past 60 days, with the June quarter EPS now expected to come in at $2.58.

Moving Biogen (BIIB) from BUY to SELL.

We are initiating coverage of Organon (OGN) with a BUY rating.

This afternoon we are making four ratings changes:

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Momentum Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Momentum Trader features.