The market has rallied for more than a year in the happy space between inflation and recession. But that dynamic is unlikely to persist. Amid persistent inflation, it is likely that the market will have to contend with high interest rates or a faltering economy. Each one is problematic.

In a flatter or faltering market, dividends provide a bigger part of total returns. Let’s get ahead of the curve and get a big fat yield.

In this issue, I highlight a stock with a massive dividend yield that has shown good price stability for several years. The company can also thrive amidst inflation and high or rising interest rates and can provide a high income return even if the market struggles through an inflation/recession catch-22.

Last week was full of ups and downs for the market, as the inflation/economic story continues to swing with every data point. And while there was volatility, by week’s end the S&P 500 and Nasdaq had risen marginally, while the Dow had gained 1%.

Last week was another constructive week, with the major indexes surviving some early volatility to finish the week higher—and with more leading (and potential leading) stocks perking up as they round out multi-week launching pads. It’s pretty obvious the intermediate-term evidence has improved during the past couple of weeks, though we wouldn’t say it’s all clear out there, as the major indexes and growth measures are moving into the thick of resistance, and this week brings an avalanche of earnings reports from key stocks, so it’s still very much a day-by-day process here. Even so, we always go with what’s in front of us—we’ll nudge our Market Monitor up to a level 7 and could go higher if more individual names kick into gear.

This week’s list has a bunch of recent earnings winners, some of which are out to new highs, while others are setting up. Our Top Pick is one of the former that has a great near- and longer-term outlook in the aerospace and defense area.

The choppy market waters of April have given way to much calmer seas through the first week of May. In the grand scheme of things, the damage (4% drawdown in the S&P 500) was limited, and the bull market remains very much intact. It pays to be an optimist, especially in bull markets. So today, we add another growth-y name (with an AI twist, of course) that has become rejuvenated and recently caught the eye of Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

Last week was full of ups and downs for the market, as the inflation/economic story continues to swing with every data point. And while there was volatility, by week’s end the S&P 500 and Nasdaq had risen marginally, while the Dow had gained 1%.

Last week was full of ups and downs for the market, as the inflation/economic story continues to swing with every data point. And while there was volatility, by week’s end the S&P 500 and Nasdaq had risen marginally, while the Dow had gained 1%.

The market has hung in there during the past couple of weeks, which is good to see, but there hasn’t been enough strength — from the major indexes or from growth stocks — to tell us the buyers have retaken control. At the same time, nothing has changed with the big picture, either, which leaves us with the same thoughts we had two weeks ago: Right now, it’s best to be cautious as the correction plays out and as earnings season goes along, but you want to be prepared to move when the tide turns back up.

For our part, we’re holding a good chunk of cash and standing pat tonight, but we have an expanded watch list as we monitor earnings season for signs of future leadership.

The dark clouds of persistent inflation and high interest rates continue to hover over the market. But with a record amount of capital on the sidelines and little to no movement in most stocks over the last two-plus years, I’m optimistic that better days are ahead, assuming the inflation/Fed clouds eventually part. Thus, I continue to seek out companies that are essentially growth stocks at value prices. And today, we add another one to our portfolio in the form of a big-name company that’s benefitting greatly from a return to normalcy in a post-Covid world … but whose shares are trading at barely half their pre-pandemic peak.

Enjoy!

The digital marketing world has been turned upside down as new privacy measures make it more challenging to track consumers across online and in-app activities.

But one company has been building out a unique opt-in data set and the backend technology to do just that. It sells this information to the biggest companies in the world so they can reach consumers with personalized marketing messages. With the new privacy measures, business is strong.

All the details are inside the May Issue of Cabot Small-Cap Confidential.

After falling 4-6% two weeks ago, the S&P 500 and Nasdaq bounced back by 2-3% last week. Quite the whipsaw! By week’s end the S&P 500 had gained 2%, the Dow had risen marginally, and the Nasdaq had added 3.3%.

After falling 4-6% two weeks ago, the S&P 500 and Nasdaq bounced back by 2-3% last week. Quite the whipsaw! By week’s end the S&P 500 had gained 2%, the Dow had risen marginally, and the Nasdaq had added 3.3%.

After falling 4-6% two weeks ago, the S&P 500 and Nasdaq bounced back by 2-3% last week. Quite the whipsaw! By week’s end the S&P 500 had gained 2%, the Dow had risen marginally, and the Nasdaq had added 3.3%.

Cabot Options Institute Quant Trader is focused exclusively on creating consistent returns using high-probability options strategies including bear call spreads, bull put spreads, iron condors and more. Whether you have questions about the strategies, or even about setting up your account, or how to make your own trades, Andy will answer all of your questions

Welcome to this week’s Cabot Macro Investor update.

I’m joking. We’re still all about small-cap stocks. But now that earnings season is over it’s all about the macro again. So we’ve got to address it.

In the second half of July, I felt like we were due for a pullback.

WHAT TO DO NOW: Remain cautious. The selling is spreading out now, so much so that our Cabot Tides have flipped to a sell signal as the number of new lows picks up. The odds still favor this being a correction, not a massive new downtrend, but most stocks (and especially growth stocks) remain under the gun. Tonight, we’re forced to sell our small remaining position in Shift4 (FOUR), which we gave every chance to hold up but has decisive broken down. We’ll also place ProShares S&P 500 Fund (SSO) on Hold given the Tides signal, though we’re holding onto what we own. All told, our cash position will be around 55%.

Beginning on a positive note, I’d like to remind you of the power of compounding returns when you stay in the stock market over time. For example, $100 invested in three-month Treasury bills in 1928 grew to only $2,141 by the end of last year while it became $46,379 invested in medium-grade corporate bonds and a stunning $624,534 if invested in a broad basket of stocks, according to data from New York University finance professor Aswath Damodaran.

China’s continued economic woes took center stage globally this week, as the country’s central bank unexpectedly cut key interest rates in a bid to spur economic growth, manage high debt in the property sector, and lower its 20% youth unemployment rate. An index of Chinese stocks traded in Hong Kong has fallen more than 9% this month.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

The rally is floundering in August.


A pullback of sorts isn’t unusual or unexpected, especially in the waning days of summer. Many investors are focused on squeezing in more summer before it slips away and they aren’t paying attention to the market.

In terms of micro-cap news, we had four updates that I want to highlight (more details below):

1) 2seventy bio (TSVT) reported earnings and hosted an earnings call. I still believe in the stock’s long-term outlook.
2) Unit Corp (UNTC) announced a $2.50 dividend and strong earnings.
3) P10 (PX) announced a strong quarter.
4) Medexus (MEDXF) announced a strong quarter.

Earnings season is about over. And the end of the summer is upon us.

This is a weird time of year for the market. Investors tend to pay less attention because many of them are focused on trying to squeeze in the last bit of summer fun and laxness before it slips away. The market tends to do whatever it was doing before people stopped paying attention.

It was going sideways, and that is what it will likely continue to do for the next several weeks. Of course, a major headline could certainly change that. But most often these waning days of summer tend to be less eventful.

Last week, our opening comments chastised the U.S. Government for such profligate spending that the most likely path as forecast by the Congressional Budget Office is for remarkably high and steady budget deficits into the distant future. We hesitated to write such a gloomy note – and didn’t mention that this is perhaps the greatest risk that long-term investors face (making blips like the next Fed rate decision or Amazon’s next earnings report seem irrelevant).

We worried that we were taking a grim outlier perspective after so many others had dismissed the Fitch credit rating downgrade. However, recent articles in The Wall Street Journal and other high-quality media outlets vindicate our math and view. This is little comfort – I wish that I were totally wrong and that my math or outlook was missing some key facts.

We comment on earnings from Bayer AG (BAYRY), Berkshire Hathaway (BRK/B), Brookfield Reinsurance Ltd (BNRE), Elanco Animal Health (ELAN), Kopin Corporation (KOPN), L.B. Foster (FSTR), Six Flags Entertainment (SIX), TreeHouse Foods (THS), Tyson Foods (TSN) and Viatris (VTRS).

Moving Ironwood Pharmaceuticals (IRWD) to Sell

With 23 days left until expiration, I’ve decided to lock in profits on our SPY bear call spread.

We’re making two modest changes today.

WHAT TO DO NOW: The minefield environment for individual stocks remains in place—today, Academy Sports (ASO), after showing solid support earlier this week, is falling apart with the group after loose peer Foot Locker (FL) is being taken apart on earnings. We’ll dump our remaining shares today. That will leave us with around 74% in cash—there’s a good chance we’ll put some to work next week if the market hangs in there, though with the meat grinder still intact, we won’t jump in heavily until we start to see more individual leaders and major indexes kick into gear.

Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.

The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.

On Holding (ONON) is in full retreat mode since reporting what appeared to be mostly good earnings on Tuesday this week.

Our BITO May 19, 2023 puts are essentially worthless, so we can lock in some decent profits and immediately sell more puts.

Moving M/I Homes (MHO) to Sell

I will be exiting the Walmart (WMT) trade today.

Walmart (WMT) is due to announce earnings Thursday before the opening bell.

Our Cabot Top Ten 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 Top Ten features.