Stocks hit another pothole this week after President Trump re-escalated tariff rhetoric against China last Friday, which genuinely spooked the market for the first time in months. He has since walked back some of those comments, and the market is rebounding in an encouraging way today. But the U.S.-China trade war is definitely back in the news, so today we aim to steer clear of it by adding a new position in something that’s a little outside our normal sandbox: a foreign currency. More specifically, it’s a fund that offers exposure to a well-known European currency, and it’s up more than 12% year to date – with more potential upside ahead. The fund was recently recommended by Carl Delfeld to his Cabot Explorer audience.

Details inside.

What started as a good week for the bulls was quickly vanquished by renewed U.S./China trade fears. How long these worries will again weigh on the market is anyone’s guess. However, Friday’s ugly selloff was enough to send the S&P 500 lower by 2.4% on the week, while the Dow fell 2.7%, and the Nasdaq lost 2.5%.

What started as a good week for the bulls was quickly vanquished by renewed U.S./China trade fears. How long these worries will again weigh on the market is anyone’s guess. However, Friday’s ugly selloff was enough to send the S&P 500 lower by 2.4% on the week, while the Dow fell 2.7%, and the Nasdaq lost 2.5%.

The markets don’t seem too swayed by the government shutdown, as they continue to remain near all-time highs.

Economically speaking, we’re not getting some reports, like inflation or unemployment, due to the shutdown. But manufacturing seems to be holding up; real estate prices continue to moderate (up 1.8%); existing home sales were down 0.2%; and consumer confidence dipped a bit. Not much to rattle the markets.

Gold hit $4,000 an ounce and the signal this is sending is not hard to grasp.

Investors are enjoying stock gains but are hedging downside currency and stock price risk as well as a hedge on growing government debt and geopolitical risk. Gold seems the most popular safe haven as it is viewed as a safe harbor asset in a way that the greenback used to be viewed. Gold’s rally began almost three years ago, fueled by central banks and Chinese investors leery of both its stock and property markets.

After spending most of the summer making a series of new highs, it’s been more of the same so far this fall.

The drawback is that the market is high-priced. Technology stocks, driven by the AI catalyst, have driven stocks higher. But certain sectors have not had a great year. Despite the impressive performance of the overall market over the last few years, there are still bargains to be found.

The real estate sector struggled during inflation and rising interest rates and has been the worst-performing sector over the last five years. Healthcare has floundered all year because of uncertainty regarding tariffs and new pricing policies from Washington. It has been the second-worst-performing market sector over the last year.

But things are turning around in both beleaguered sectors. The Fed started cutting the fed funds rate again in September and two more cuts are expected this year. The long-anticipated issues in the healthcare industry have revealed themselves. And it doesn’t seem nearly as bad as feared. As a result, healthcare stocks had the strongest weekly rally in more than 20 years.

In this issue, I highlight a REIT that specializes in healthcare properties. It has a stellar track record of performance and has among the fastest earnings growth among REITs. It also pays a strong dividend yield and will likely benefit in the months ahead from a rally in either sector.

Despite the worries surrounding the government shutdown, the market continued its winning ways last week as the S&P 500 and Dow both rallied 1.1%, and the Nasdaq added 1.3%.

The market’s uptrend continues, but as has been the case for many weeks, it’s somewhat tricky out there, with news-driven moves, selling on strength, the occasional bout of rotation and potholes—all while large swaths of the market are doing a lot more chopping than trending. That’s not “bad,” per se, but it remains a selective environment: We continue to take things on a stock-by-stock basis, focusing on strong names that are ideally fresher in their uptrends, while also being active with portfolio management. We’ll again leave our Market Monitor at a level 7.

This week’s list again has a heavy growth component, and not all are in the AI realm, which we find encouraging. Our Top Pick is a blue chip e-commerce name that, after a couple of false starts, looks like it’s ready to move.

Stocks keep reaching new heights, as last week’s concerns about the market starting to show cracks under the surface seem to have been overblown, at least in the near term. Third-quarter earnings season gets underway next week, and expectations are high again, with economists expecting 8% growth. Companies may have to exceed those lofty expectations to keep this rally going. For now, though, the market is rolling.

To account for some possible bumpiness ahead, however, today I’m adding a big-name value stock to our portfolio. It’s one that I recommended to my Cabot Value Investor audience last month, and it’s already off to a fast start. It’s a company that thrives when the global economy is sound – which it is, despite myriad fears to the contrary.

Details inside.

Despite the worries surrounding the government shutdown the market continued its winning ways last week as the S&P 500 and Dow both rallied 1.1%, and the Nasdaq added 1.3%.

Despite the worries surrounding the government shutdown the market continued its winning ways last week as the S&P 500 and Dow both rallied 1.1%, and the Nasdaq added 1.3%.

Remember fintech? It was one of the biggest buzzwords on Wall Street a couple years ago until AI came in and gobbled up all investors’ attention. But the nascent sector never stopped growing, and now share prices are well below their apex as investors have largely ignored the sector the last couple years. In fact, this month’s new fintech addition to the Cabot Value Investor portfolio has almost never been cheaper since coming public in 2020. And yet, the company is still expanding both sales and earnings by more than 25% annually.

It’s a classic growth-at-value-prices story. And we think it has 45% upside in the short-to-intermediate term. Details inside.

The S&P 600 Small Cap Index rose modestly this week but not quite to the 1,340 level the index reached on June 11.

We’re seeing what could be an early pattern of higher highs and higher lows for the index, though for that trend to firm up we need to see the index get closer to its 200-day line (currently at 1,367) in the next week or two, and not fall below 1,284.

Three years ago this month, I went to see my first movie in a theater since Covid. The film was Top Gun: Maverick, a movie that tapped into my 1980s nostalgia and was more entertaining and coherent than your average sequel. I wasn’t alone – the film grossed nearly $1.5 billion worldwide, making it the highest-grossing movie of Tom Cruise’s career, which is really saying something. Steven Spielberg thanked Cruise for “saving movie theaters.” He may have been right: In the two previous Covid-tainted years, 2020 and 2021, U.S. movie theaters grossed just over $6.5 billion combined – barely more than half of the industry’s 2018 peak of $11.89 billion.

Stocks have been impressively resilient. The market handled the Iran news like a trooper. Stocks have rallied since the U.S. bombing.

It seems like the default position of investors is optimism. Stocks seem to want to go higher and only go lower when they defy gravity. The market made up the tariff panic in short order. Rates have remained stubbornly high. The news from the Middle East is wild. Yet stocks are within bad-breath distance of the all-time high.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), Centuri Holdings (CTRI), Intel (INTC), Kenvue (KVUE), Paramount Global (PARA) and SLB Ltd. (SLB).

Alcoa (AA) is navigating tariff-related challenges relating to aluminum pricing and sourcing.

SLB Ltd. (SLB) is well positioned to benefit from anticipated oil and natural gas price increases arising from the Iran/Israel conflict.

NOTE: We’re publishing this update a day early as our offices (along with the overall market) will be closed tomorrow for Juneteenth.

WHAT TO DO NOW: Continue to lean bullish but stand pat for now. Overall, the market is handling the Middle East uncertainties well, with the major indexes and most stocks holding up well and most of the intermediate-term evidence in good shape. Still, with most stocks and indexes in holding patterns, we’ll follow along tonight—holding our 28% cash position and our current positions as we wait to see if more stocks can eventually lift out of their recent tight ranges.

Tuesday’s edition of The New York Times had a stock-centric article titled, “The S&P is Nearing a Record. Really.” The subtext, of course, is that stocks have climbed near February all-time highs despite a bevy of geopolitical tensions, potential economic landmines, and widespread investor and consumer pessimism. As I wrote last week, the market has fully recovered from its tariff-fueled cratering of late March and early April, but lingering uncertainties threaten to derail it at any moment … and that was before Israel and Iran started bombing each other.

There really isn’t a lot to complain about. But I’ll try.

The S&P 500 spiked about 25% from the low of early April. The index is now up around 2% YTD, up 1.5% in June, and is just 2% from the all-time high. That’s great in terms of coming off the precipice of a bear market. But a 2% YTD return halfway through June isn’t exactly lighting it on fire.

With the stock market and Cabot’s office closed tomorrow for the Juneteenth federal holiday, this week’s update is coming your way a day early.

The market’s biggest concern at the moment is, of course, the conflict between Israel and Iran. I think it’s impressive how resilient the market has been given these developments in the Middle East.

The market has been bouncy in recent days but is still close to the high. Prices are high, but uncertainty is growing.

Stocks sold off on Friday as Israel and Iran exchanged bombings. But the market rose on Monday as investors are expecting a quick end to the conflict. Anything can happen. The conflict adds another degree of uncertainty beyond the tariffs and the economy.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Dollar Tree (DLTR), GE Aerospace (GE), Goodyear Tire & Rubber (GT), Intel (INTC), Paramount Global (PARA), SLB Ltd. (SLB) and UiPath (PATH).

Agnico Eagle (AEM) is poised to benefit from a major change in the balance of global reserve assets.

The S&P 600 SmallCap Index hit a multi-week high on Tuesday before giving a little back yesterday.

There’s some interesting data that suggests small-cap stocks could be in for a run starting now.

According to data from Evercore ISI, small-cap stocks have done better than large caps 60% of the time in June, dating back to 1990. The odds are even better when small caps enter June underperforming, as they have for a while now.

FTAI Aviation (FTAI) Short Report

WHAT TO DO NOW: The market is again mixed today, with the major indexes holding their own—but the under-the-surface action remains very hit-and-miss among growth stocks. Today’s bulletin concerns Palantir (PLTR), which has been churning for many weeks and is now starting to slip. It’s not a death knell, but we’re going to trim here, selling one-third of our remaining shares in the stock.

Enovix (ENVX) Pops After Achieving Milestones

WHAT TO DO NOW: Happily, the year is off to a generally good start, but the situation remains tricky, with the market’s intermediate-term trends neutral-to-negative and with the early January effect (tons of volatility among individual stocks) being seen in many names. Today’s bulletin is regarding Axon Enterprises (AXON), which has been a solid winner for us but has been losing ground for a few weeks and today is cracking support on big volume. We’ll sell our remaining shares, taking the rest of our profit off the table. Details below.

Perpetua Resources (PPTA) Gets Green Light

I hope you’ve had a wonderful holiday season and are looking forward to a healthy and profitable 2025. I know I am.

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 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.