Issues
The stock market rallied nicely into the Federal Reserve meeting, and then tacked on even more gains following it, and by week’s end the S&P 500 had risen 1.2%, the Dow had rallied 1%, and the Nasdaq gained 2.2%.
The stock market rallied nicely into the Federal Reserve meeting, and then tacked on even more gains following it, and by week’s end the S&P 500 had risen 1.2%, the Dow had rallied 1%, and the Nasdaq gained 2.2%.
The story remains mostly the same, with the overall market remaining in great shape, though it is a bit near-term extended, while growth stocks are good-not-great, with a lot of names mostly marking time, and even some AI names doing the same. That said, we have seen a little broadening of leadership of late, which should provide some opportunities down the road. Today we’re adding one new half-sized stake in a name that looks to have changed character today (up a lot, but this comes after a two-month correction), but we’re still going to hold 38% in cash as we look for more titles to get going.
With a big Fed meeting on tap for this afternoon, we’re continuing to maintain a steady pace of adding new positions, selling off some weaker ones, and adding fresh names to our Watch List.
Details on all of the above are included in this September’s Issue. Enjoy!
Details on all of the above are included in this September’s Issue. Enjoy!
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%.
For the most part, the story remains the same with the market, as most of the evidence is positive, though not necessarily powerful. The good news is that, for the first time in a while, we’re starting to see a little broadening in leadership: AI-related names remain strong, and now more medical and online names are starting to shape up along with some more cyclical plays. Today, we’ll stick with our current stance—Market Monitor at a level 7—though we could tweak that if we continue to see more names emerge.
This week’s list has something for everyone, from strong Ai-related names to cyclical outfits, and from those in strong uptrends to those with nice setups. Our Top Pick has the look of a potential liquid leader and after seven weeks of choppy action, is starting to break out nicely.
This week’s list has something for everyone, from strong Ai-related names to cyclical outfits, and from those in strong uptrends to those with nice setups. Our Top Pick has the look of a potential liquid leader and after seven weeks of choppy action, is starting to break out nicely.
Stocks are already at all-time highs, and now it appears the Fed is (finally) prepared to give them an extra nudge in the form of interest rate cuts this week. When that happens, it’s typically bullish for stocks, even if there are some bumps along the way. So today, we continue to try and capitalize on a growth-friendly market by adding a fast-expanding biotech play to the Stock of the Week portfolio. It’s a new recommendation from Mike Cintolo in his momentum-based Cabot Top Ten Trader newsletter. And it’s been on a tear for the last month.
Details inside.
Details inside.
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.
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.
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.
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.
Updates
The resilient summer market got a cold slap in the face last week. There was a big recovery on Monday. But the market still looks wobblier than it did a week ago.
One day’s headlines seemed to undo the positive market narrative.
One day’s headlines seemed to undo the positive market narrative.
Stocks are recovering so far this week after a big selloff on Friday.
The sweet summer market that had consistently set new highs got a cold slap in the face last week. But trading so far this week indicates it might not be a game-changer.
The market was looking good a week ago. The huge trade deal with Europe alleviated much uncertainty about tariffs. Second-quarter GDP came in at a much stronger-than-expected 3%. Tariff uncertainty was fading away, and the economy was stronger than expected. But then news of a much worse-than-expected job number for July, along with significant downward revisions for the prior two months, combined with increasing tariff threats to China, India, and Canada and shattered the positive narrative.
The sweet summer market that had consistently set new highs got a cold slap in the face last week. But trading so far this week indicates it might not be a game-changer.
The market was looking good a week ago. The huge trade deal with Europe alleviated much uncertainty about tariffs. Second-quarter GDP came in at a much stronger-than-expected 3%. Tariff uncertainty was fading away, and the economy was stronger than expected. But then news of a much worse-than-expected job number for July, along with significant downward revisions for the prior two months, combined with increasing tariff threats to China, India, and Canada and shattered the positive narrative.
With the current earnings season more than halfway complete for S&P 500 companies, a clearer picture of the overall corporate health backdrop is beginning to emerge.
WHAT TO DO NOW: Remain bullish, but continue to keep some of your powder dry. The market remains in a solid uptrend, but more indexes and stocks have been stalling out. To be fair, we are seeing some growth names finally kick into gear, but we still think it’s best to ease off the accelerator a bit as we see how earnings season goes. In the Model Portfolio, we sold Uber (UBER) and bought a half-sized stake in Oracle (ORCL) on a special bulletin Tuesday; tonight we’ll make one small move, adding another 3% position to Rubrik (RBRK), which appears to be emerging from its slumber. We’ll still hold around 30% cash after these moves.
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.
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.
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.
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.”
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.
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.
Alerts
Enovix Warrant (ENVXW) Follow Up. Exercise Enovix Warrants (ENVXW)
We added a half position in Freshworks (FRSH) back in March and another half in May.
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 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.
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.
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.
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.
Portfolios
Strategy
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.
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.
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.