Risk off was the theme last week as traders are once again worried about sticky inflation, and now there is growing fear of further war in the Middle East. And while those are two big worries, big picture it wasn’t a terrible week for the indexes as the S&P 500 and Nasdaq both fell 1.6%, while the Dow lost 2.36%

After weeks of churning and choppy action, last week finally brought some “real” negative headlines that kicked the fear level up a few notches. As always, what’s more important to us is the market’s reaction to the news, and at this point, the intermediate-term advance is on the fence, with most indexes testing their 50-day lines and with more and more leaders doing the same. Big picture, it’s hardly a disaster, but we continue to be a little cautious, being selective on the buy side and holding some cash. We’ll pull down our Market Monitor to a level 6.

This week’s list has something for everyone, with growth, crypto, commodities and all types of potential setups. Our Top Pick is a smaller outfit with a great story—and it’s one of the few stocks that’s shown big-volume buying in recent days.

The first real market turbulence of 2024 has arrived. But you don’t have to fear it. Pullbacks are normal – no bull market simply goes up in perpetuity – and, in the long run, healthy. It’s best to use it as an opportunity to cleanse your portfolio of some laggards and buy good companies at better prices. We check both of those boxes in today’s issue, adding an up-and-coming retail cookie-cutter story that’s a new favorite of Cabot Growth Investor Chief Analyst Mike Cintolo. Mike loves the upside, and buying on the recent dip makes it even more attractive.

Risk off was the theme last week as traders are once again worried about sticky inflation, and now there is growing fear of further war in the Middle East. And while those are two big worries, big picture it wasn’t a terrible week for the indexes as the S&P 500 and Nasdaq both fell 1.6%, while the Dow lost 2.36%

Risk off was the theme last week as traders are once again worried about sticky inflation, and now there is growing fear of further war in the Middle East. And while those are two big worries, big picture it wasn’t a terrible week for the indexes as the S&P 500 and Nasdaq both fell 1.6%, while the Dow lost 2.36%

It was more of the same for the markets this past month—some momentum, but ultimately, we ended up in just about the same place.

Investors are a little gun-shy as most were expecting Fed rate cuts to begin in the latter half of the year. But as the inflation beast is proving harder to tame than expected, Fed Chair Jerome Powell has indicated it may take longer before we see a rate cut. Naturally, the markets had an issue with that.

However, they seem to have absorbed that information and gone back to business.

All in all, we are still bullish here at Cabot, but also maintaining our judicious stock-picking stance.


This month, I have an undervalued company that’s also in growth mode for you, recommended by an analyst new to these pages. I’m really excited for you to hear about both!

Inflation appears stuck at a much higher level than acceptable for the Federal Reserve so lower interest rates are on pause. Gold is one beneficiary.

This means that some high-flyer tech stocks may be vulnerable. Meanwhile, Japanese stocks remain near all-time highs.

Fortunately, we have exposure to both gold and Japan in the Explorer portfolio, and today we add to that exposure.

While the financial news obsesses over what the Fed might have vaguely implied in the latest statement, the world is morphing into a different place. The demographic of humanity is rapidly transforming in a way that will massively affect the flow of money for the rest of our lives. The world is currently undergoing a technological revolution that is transforming society and everyday life.

The aging population and the technological revolution are megatrends that will dominate the investment landscape for years to come regardless of what the Fed does, or GDP in the next few quarters, or whoever gets elected president. It’s not an accident that the best performing stocks in the Cabot Dividend Investor portfolio are in healthcare and technology. Nor will it be an accident that these same stocks continue to dominate from this point forward.

In this issue, I highlight the massive opportunity to position yourself in front of a tsunami that could provide the best investments of your lifetime.

For the past six to nine months the consensus among traders had been that the Federal Reserve would be cutting interest rates this year, and some thought it would be aggressive cutting. However, that narrative may have changed on Thursday as two Fed members noted that the central bank might not cut at all in 2024. This sent shockwaves through the stock market Thursday and Friday.


By week’s end the S&P 500 had fallen1%, the Dow had lost 2.25% and the Nasdaq had declined by 1%.

When it comes to the market and especially leading, Top Ten-type stocks, we’re increasingly seeing a game of ping pong occur—one day, the market and most stocks are up, but a day or two later will see selling, with many names that were perking up smacked right back down. We learned long ago not to anticipate things, so we continue to lean bullish but are also being selective. We’ll move our Market Monitor back to a level 7, but the real key is to remain flexible and take things on a stock-by-stock basis.

Meanwhile, our screens continue to find strong situations, including some decent setups should the market get moving. Our Top Pick this week is a name from the chip sector that erupted after earnings in February, but has spent two months calming down and is now standing just above support. A resumption of the rally from here would be tempting.

Stocks are coming off a rare down week, though the “damage” was mostly limited to last Thursday after a couple rogue Fed members came out with some hawkish quotes (though, in fairness, this happens just about every month). Still, the bull market is very much intact, and it’s a great time to go looking for growth stocks at value prices. As the new Chief Analyst of Cabot Value Investor, I just added such a stock to that portfolio, so today’s new Stock of the Week recommendation comes from yours truly. It’s a giant in the auto industry that is benefitting greatly from Americans’ burgeoning appetite for hybrid cars.

For the past six to nine months the consensus among traders had been that the Federal Reserve would be cutting interest rates this year, and some thought it would be aggressive cutting. However, that narrative may have changed on Thursday as two Fed members noted that the central bank might not cut at all in 2024. This sent shockwaves through the stock market Thursday and Friday.

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).

The last two weeks have been a lot less fun than June and most of July. But big picture, a pullback is not remotely surprising.

Through yesterday’s close, both the large and small-cap indices were down about 2.6% from their recent highs. The Nasdaq was down almost 5%.

What is a little surprising is the rapid change of tone out there. This can be squarely blamed on Fitch’s downgrade of U.S. debt and Moody’s bearish notes on those 10 banks they think don’t look so hot.

At least four states posted record cannabis sales in June and July, Illinois, Maryland, Massachusetts and Missouri.

These sales trends and ongoing legalization around the world are why global cannabis sales will hit $104 billion a year by 2030, says a recent report from Vantage Market Research. That would represent an annual growth of 26% a year from 2023 to 2030.

Despite these positive trends, cannabis stocks are being held back by delays in reform efforts in Washington, D.C.

As most everyone knows, last week, Fitch Ratings downgraded the credit rating of U.S. Long-Term Foreign-Currency Issuer Default Rating (IDR) to AA+ from AAA. This follows by a decade a similar downgrade by Standard & Poor’s.


The response by politicians, media, capital markets participants and commentators was a big yawn at best, with more than a few sharp dismissals and denials of the report’s relevance, timeliness and accuracy.


In the real world, which is outside of the publicity bubble, what does the downgrade actually mean? In the near term, almost nothing. The ability of the U.S. government today to attract capital on respectable terms and repay its debts on time and in full is rock solid. Few if any sovereign debt has a repayment track record and underlying fundamentals that are as sturdy as that of U.S. government debt.

Stocks are starting the week back in business after last week’s dip over the credit downgrade. The credit downgrade doesn’t appear to be having much effect on the market at this point. Unless that changes, the market appears poised to continue to forge higher, at least for the time being.

Meanwhile, it’s still earnings season and the past couple of weeks have been busy for the portfolio. Earnings had been very kind to the portfolio two weeks ago with Digital Realty (DLR), AbbVie (ABBV), and Intel (INTC) all getting sizable boosts with better-than-expected results. But the season soured on the portfolio last week as both Qualcomm (QCOM) and Star Bulk Carriers (SBLK) laid eggs.

We comment on earnings from Adient (ADNT), Dril-Quip (DRQ), ESAB Corp (ESAB), Frontier Group Holdings (ULCC), Gannett (GCI), Goodyear Tire (GT), Janus Henderson Group (JHG), Kaman Corporation (KAMN), Warner Bros Discovery (WBD) and Western Digital (WDC).

I’m closing out my NexPoint Diversified (NXDT) recommendation and selling my shares. I had an update call last week; I would characterize the update call as positive (more details below).

We currently own the AAPL January 17, 2025, 135 call LEAPS contract at $48.00. You must own LEAPS in order to use this strategy.

I want to add some additional downside exposure; so, with QQQ trading for 347.13, I want to place a short-term bear call spread going out 51 days and outside of the expected range to the upside, or 368. My intent is to take off the trade well before the July 21, 2023, expiration date.

After recently locking in profits on our SPY June 16, 2023, 430/435 bear call spread, it’s time to look towards selling some premium for the July 21, 2023, expiration cycle with 56 days until expiration (dte).

I will be exiting the Costco (COST) trade today.

ELF and SNOW Report

Costco (COST) is due to announce earnings Thursday after the closing bell.

We currently own the DBC January 17, 2025, 21 call LEAPS contract at $4.80. You must own LEAPS in order to use this strategy.

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.