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.

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.

Most of the evidence remains bullish, so we continue to hold our winners and selectively put money to work — but the fact is that most growth stocks have been chopping sideways overall for a month or two, so we’re OK holding some cash and waiting patiently for the market and leaders to show their near-term hand. Tonight, we’re booking a little more partial profits in one of our winners, but are standing pat otherwise and will follow the lead of the market—and of leaders—going ahead.

After years of being either ignored or sold off, value stocks are finally having a moment on Wall Street. The Vanguard S&P 500 Value Index Fund (VOOV) is up 25% in the last five months and is actually outpacing growth titles over the last month. Still, it’s a bull market, and growth stocks are king. How to compete as value investors in a growth-minded market? By seeking growth stocks at value prices.

Today, we do just that, adding a household name that’s been rejuvenated thanks to a shift in industry trends. The stock is up 18% year to date, and yet its shares remain dirt cheap by virtually every measure.

Enjoy!

Earnings season is now in full swing, but central bankers stole the show this week.

On Wednesday the FOMC hiked by another 25bps (as expected) and Fed Chair Jerome Powell gave the market just enough for the bulls to remain in control, for now.

The highlights: First, he said he thinks the Fed can get inflation down to 2% by 2025 while avoiding a recession. The Fed’s staff no longer predicts a recession.

Let the good times roll. Inflation is collapsing. The Fed is almost done hiking rates and likely to turn distinctively more dovish in the 2024 election year. There is no recession and no signs of recession. Stocks are thriving. And it’s summer.

This was another quiet week in the small-cap world, but large-cap companies are in the full swing of earnings.

Earnings season represents a great time to “check up” on our micro-cap recommendations to make sure each investment case is on track.

Here’s what’s on tap for earnings this week in the large-cap world.

As interest rates were roiling the stock market last year, it seemed like the long bull market was over. By mid-October, the S&P 500 had slid 27% from year-end 2021. Since then, however, stocks have surged. Today, the S&P 500 is 30% higher than that Halloween-month nadir. And, the index is only 5% away from reaching its prior all-time high. Clearly, the bear market has ended.

For nearly 40% of stocks in the index, their stock prices are now above their year-end 2021 level. It’s not just mega-cap tech stocks like Nvidia (NVDA), which is now 51% higher, or Apple (AAPL), up 8%, or Microsoft (MSFT), up 2%. More prosaic stocks like Occidental Petroleum (OXY), up 110%, Cardinal Health (CAH), up 81% and Lamb Weston (LW) up 78%, have rebounded sharply, as well

We comment on earnings from Capital One (COF), First Horizon (FHN) and Nokia (NOK). Next week, the deluge starts, with ten companies reporting.

WHAT TO DO NOW: Remain bullish, but be prepared for some near-term (and possibly earnings-induced) gyrations. Today’s sharp drop in the Nasdaq and many leaders is a short-term shot across the bow—combined with some other factors, the odds are growing that we may finally see some selling that lasts for more than a couple of days. That said, the overall environment remains bullish, with higher prices likely down the road. All in all, we’re bullish but are taking things on a stock-by-stock basis and expect some further wobbles in the days ahead. Our only change tonight is that we’re placing Celsius (CELH) on Hold. Our cash position remains around 16%.

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

Aside from AI, a few other big-picture themes came into sharper focus for me this week.

All are positive for small caps.

First, economists and analysts are reducing their recession risk outlooks as the economy continues to hold up reasonably well. That’s good for small caps as they are more economically sensitive than mid and large caps.

This is a short week as we begin the second half of 2023 with inflation down, recession fears fading, and the animal spirits of investors alive and well.

In the first half of 2023, market performance was positive and narrow, largely driven by the big tech names, and especially artificial intelligence (AI) related stocks. The Dow was up 3.8%, the S&P 500 gained 15.9%, and the tech-heavy Nasdaq was up 31.7%. We will continue to explore the world for the best value and growth stocks providing both conservative and aggressive ideas. EVs across the supply chain, resources, and emerging markets remain the focus but we have the flexibility to change course as opportunities arise.

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 good year is continuing. The market rally is broadening. And pundits increasingly have positive things to say about the second half of the year.


Artificial intelligence isn’t the only mania capturing the imagination of investors. The soft-landing belief is also widespread. Investors see inflation falling fast, the Fed nearly done hiking rates, and no recession. It looks like we can get through this rate hiking cycle, the steepest in decades, without much economic pain.

With 14 days left until the May 19, 2023, expiration cycle ends, we need to begin the process of rolling the remainder of our short calls and immediately selling more call premium in June.

Alphatec reported preliminary Q1 results on April 19 when the company announced the acquisition of the REMI Robotic Navigation System.

HUBS, SITM and MSFT

Updates on NRDS, LUNG, TKR & ISEE

I will be exiting the Starbucks (SBUX) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET this Friday, May 5.

Sprout Social beat on the top and bottom lines after the close yesterday. Revenue rose 31% to $75.2 million (beat by $130K) while EPS of $0.06 improved from a loss of -$0.03 in the year-ago quarter and beat by $0.07.

As discussed in our weekly issue, and on our weekly call, I will be taking a position in Starbucks (SBUX) today. SBUX is due to announce earnings after the closing bell today (May 2). The stock is currently trading for 113.60.

Okay, it’s time to take some profits. Albeit on the small side, I’ve decided to lock in profits in our SPY iron condor and look to sell another iron condor after the Fed announcement tomorrow.

Terex reported Q1 2023 results that beat expectations after the close yesterday. The company also raised full-year guidance by more than the Q1 beat. The result should quiet some of the concerns of a slowdown and help the stock do well today.

I am buying back our short calls today and immediately selling more premium. Our May 5, 2023, 57 calls are essentially worthless, so let’s buy back our calls, lock in some profits and immediately sell more call premium.

There is little premium left in our May 19, 2023, 60 puts. As a result, I want to buy back our puts and immediately sell more put premium.

I will be exiting the Exxon Mobil (XOM) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET, today April 28.

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.