Ahead of the “big” Federal Reserve event this Wednesday the leading indexes all advanced last week as the S&P 500 gained 1.6%, the Dow rallied 1% and the Nasdaq rose by 2%.

Ahead of the “big” Federal Reserve event this Wednesday the leading indexes all advanced last week as the S&P 500 gained 1.6%, the Dow rallied 1% and the Nasdaq rose by 2%.

The markets continued rolling along this past month, buoyed by hopes that the Trump administration’s pressure on the Fed will result in the beginning of some serious rate cuts.

About 88% of the forecasts are calling for a half-point rate reduction at the Fed’s September 17 meeting, although economists at Goldman Sachs are predicting that August inflation numbers will be higher than expected, maybe dampening that forecast.

“Smooth seas do not make skillful sailors.” - African Proverb

For the first time this year, this week all three major benchmarks closed at all-time highs during the same session on the hunch that a lousy job market will spur a series of interest rate cuts by the Federal Reserve.

This market is impressively resilient. It continues to forge higher even in the historically cranky post-summer environment.

Stocks could boom for the rest of the year. After all, the optimists have been right. And the longer-term prognosis is positive for stocks. However, the near-term direction is more precarious. There is still plenty of uncertainty swirling around with the market indexes perched at lofty valuations.

The tariff issues may be fading but they’re still out there. The Fed and the economy are also wild cards. Meanwhile, the S&P 500 currently sells at a price/earnings ratio of 28.8 times. That’s the highest valuation in the last 25 years. Anything can happen.

The current situation calls for a certain kind of stock that can thrive in almost any market environment. If the market takes off, it can participate. If the market goes flat, it can generate positive returns. And if the market turns south, it can yield superior relative returns.

In this issue, I highlight an existing portfolio position that is one of the very best midstream energy companies on the market. It pays a huge 6.9% yield, deals primarily with natural gas, sells at a cheap valuation, and has a massive growth spurt ahead as new projects come online.

The growing natural gas demand from utilities and exporters will provide an unprecedented runway for growth in the years ahead that historical performance doesn’t reflect.

The market had another week of heavy sector and index rotation nearly every day, as hot money seemingly chased the new fad/theme based on every economic data point and earnings reaction. Yet despite the day-to-day market wiggles, by week’s end, not much ground was gained or lost as the S&P 500 gained 0.3%, the Dow lost 0.3% and the Nasdaq rose by 1.1%.

After a tough start following the long weekend, the market did find some support by week’s end, but overall, the situation remains the same: The evidence is more positive than not, but when looking at individual stocks, there are many areas that are struggling, while on a day-to-day basis, money continues to thrash around. To be clear, that action doesn’t predict doom—this is a bull market after all—but it does mean that making and holding onto money in this environment remains a challenge. We’ll stick with a Level 7 on the Market Monitor.

Interestingly, this week’s list does have a bit more of a growth flavor, though it’s not all AI, as other areas are seeing a bit of leadership emerge. Our Top Pick has been a clear mid-cap leader of the advance and is now exhaling to its 10-week line.

So far, so good in September, as there’s no market correction in sight. The increasing likelihood of a Fed rate cut later this month is helping to counteract the negative effects of seasonality during the traditional “spooky season.” Let’s hope the Fed doesn’t disappoint when they convene next week. In the meantime, the investing waters are warm, so let’s take a bigger swing this week by adding one of the world’s greatest and highest-profile growth companies to our portfolio. It’s a recent recommendation from Carl Delfeld to his Cabot Explorer audience. And it’s a former market darling that, after a rough couple years, is starting to gain traction with investors again.

Details inside.

The market had another week of heavy sector and index rotation nearly every day, as hot money seemingly is chasing the new fad/theme based on every economic data point and earnings reaction. Yet despite the day-to-day market wiggles, by week’s end not much ground was made or lost as the S&P 500 gained 0.3%, the Dow lost 0.3% and the Nasdaq rose by 1.1%.

The market had another week of heavy sector and index rotation nearly every day, as hot money seemingly is chasing the new fad/theme based on every economic data point and earnings reaction. Yet despite the day-to-day market wiggles, by week’s end not much ground was made or lost as the S&P 500 gained 0.3%, the Dow lost 0.3% and the Nasdaq rose by 1.1%.

The bull market is alive and well, but the growth stock environment remains tricky at best, with more names either testing or cracking intermediate-term support during the past couple of weeks. Eventually, there will be another run in growth, possibly soon given the many stocks that have built launching pads during the past two-plus months; we do have an expanding watch list of solid setups. But for now, we’re playing things cautiously, trying to give our positions a chance but also holding a good chunk of cash until the meat-grinder environment shifts.

Rumors of the global economy’s imminent demise have been greatly exaggerated – at least so far. Indeed, the IMF estimates that worldwide GDP will expand by more than 3% both this year and next, which is in line with the normal GDP growth rate since the Great Recession. And yet, certain stocks are being treated like it’s 2009 out there. That includes this month’s addition to our Growth & Income Portfolio. It’s a big-cap, big-name company whose shares are nearly 30% off their highs, but the firm is on track for its best year in terms of sales and earnings outside of a Covid-era anomaly. It’s a company that flourishes when the global economy is healthy. And the stock is on sale, having not fully recovered from the spring tariff worries.

Details inside.

The big macro news this week is that the U.S. economy is doing well and there’s no really clear reason for the Fed to cut interest rates. Trade deals continue to be announced, and the U.S. should be bringing in a good deal more money due to tariffs than it has in the recent past.

Real GDP was just announced to have risen 3%, thanks to capex on hardware and software to build out data centers. Results from Microsoft (MSFT) and Meta (META) confirmed this trend.

A surprisingly productive July comes to a close with the market near all-time highs and volatility at a relative low. I’ve written in recent weeks about the reasons that could change in August and September – the highest stock valuations since the February high, lingering tariff uncertainty and its potential impact on a heretofore resilient economy, frothy warning signs like new meme stocks and soaring bitcoin prices, and the usual selling that occurs right after Labor Day. But for now, stocks are doing just fine, and that includes value stocks, which have risen more than 6% year to date.

The market yawned off great news over the weekend but managed to make a new high nonetheless.

Investors don’t seem to care about tariffs anymore, and the market continues to forge slowly higher regardless of the news. Tariff concern is so last April.

It’s another new high! The market continues to forge slowly higher.

There was positive tariff news over the weekend. President Trump and European Commission President Ursula von der Leyen agreed to the framework of a trade deal that includes a 15% tariff on European imports and an agreement by the EU to buy $750 billion worth of U.S. energy over three years. Although the deal so far is considered highly advantageous to the U.S., it’s only a broad outline with many details to be worked out.

The proposed merger between Union Pacific (UNP) and Norfolk Southern (NSC) throws into sharp relief an accelerating—some would say disturbing—trend of mega-consolidation across a number of key industries.

The S&P 500 closed at a fresh record high yesterday, while the S&P 600 SmallCap Index closed at its highest level since February 21.

While there is plenty for the worriers to worry about in the short term – next Wednesday’s Fed meeting, next Thursday’s PCE price index (the Fed’s preferred inflation data), tariffs and Liberation Day 2.0 next Friday – the market seems to be saying, “Don’t sweat it, this will all work out.”

This was a good week for Explorer stocks with Agnico Eagle Mines (AEM) up 6.2%, Alibaba (BABA) up 5.9%, Banco Santander (SAN) shares rising 6.2%, and BYD (BYDDY) shares surging 8.1% this week.

It was a painful process with America’s most valuable ally, but a trade/investment deal was finally reached with Japan, which buoyed markets. Frameworks for deals with the Philippines and Indonesia were also agreed to, sending the S&P 500 to a new high. The market seems mostly concerned with China. The reason is that annual S&P 500 revenue from China is $1.2 trillion, roughly four times the U.S. trade deficit with China.

GameStop (GME) became a household name to investors long after it was a household name to young gamers who liked to play Call of Duty, Grand Theft Auto and EA Sports video games. In January 2021, the struggling and widely shorted stock experienced an almost unprecedented resurgence thanks to a Reddit message board-fueled short squeeze orchestrated by someone named Keith Gill, under his more public alias Roaring Kitty.

The renewed tariff uncertainty is affecting the market. Stocks are going up slower now.

It looks like a market that wants to go higher. The tariff stuff is just holding it back for now, but just barely. The S&P 500 still made a new high on Monday. And earnings season is starting to heat up. Later this week and next week, several big tech companies report. Good news could ignite a market rally despite anything going on in the world besides artificial intelligence.

Just when it looked like happy days were here again, volatility has reared its ugly head.

Granted, this week’s volatility spike was muted by historical standards, but relative to the ultra-low volatility of the last few weeks, it was enough to give pause for the bulls.

WHAT TO DO NOW: We remain overall bullish, but fewer growth stocks and sectors are making headway of late, and with earnings season revving up, we’re becoming more selective on the buy side while tightening stops on some laggards. In the Model Portfolio tonight, we’re going to sell our stake in Take-Two Interactive (TTWO), start a half-sized position in Life360 (LIF) and place Uber (UBER) back on Hold. Our cash position will remain around 32%.

After hitting multi-month highs last Thursday, the S&P 600 SmallCap Index has since pulled back modestly.

Given all the talk of tariffs and Trump firing Powell, and the beginning of earnings season (so far so good), I’d say a modest pullback is a win.

We added a half position in Freshworks (FRSH) back in March and another half in May.

Sell Palomar (PLMR)

Heading into mid-day shares of BYRN are down about 20%, canceling out our paper gain that accumulated over the last five weeks. Here are a few thoughts after digesting commentary on this morning’s conference call.

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.

The management team at Enovix (ENVX) has been busy.


Late last week, the company announced a $60 million share buyback program. Then yesterday, the company released preliminary Q2 results that came in slightly better than management guidance.

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.

Sell Apple (AAPL) and LandBridge (LB)

Right on the heels of yesterday’s Issue featuring new addition Byrna Technologies (BYRN) management released preliminary Q2 revenue. The press release came just after the closing bell yesterday.

Sell a Quarter Position in Pan American Silver (PAAS)

Hannan management was out with two updates this morning.

MLPs (short for master limited partnership) are exempt from U.S. corporate taxes in exchange for passing on most of their income to investors, who are called unitholders. As a result of this unusual situation, unitholders accept the tax burden on the distributions they receive from the MLP.

One of the things many investors like best about dividend income is that it can qualify for the lower Federal capital gains tax rate. For investors in the 25% to 35% marginal tax bracket, that’s 15%, and for those in lower brackets, it’s 0%. But not all dividends and distributions qualify.

Real estate investment trusts are special-purpose entities, with special tax status, that own real estate and pass along most of the income from the real estate (rents or mortgage payments) to shareholders. They can own any type of real estate, and many specialize in one type.

This month, I’m considering making the first sale from our portfolio, to cut our losses in Seadrill (SDRL). I think now is a good time to address our approach to selling, which stems from our focus on long-term, income-oriented returns.

Guide to Options Trading

Even if you’ve been investing for decades, income investing can introduce a lot of new lingo and acronyms, which are not always well explained. Here are some of the key terms I use in Cabot Dividend Investor or that you may see as you research your investments further.

Using Options to Hedge a Portfolio


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.

Here some of the most common questions Mike Cintolo gets from the readers of Cabot Top Ten Trader.