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At a high level, the market is still humming on all cylinders, with the S&P 500 and Nasdaq hovering near all-time highs. But look closer, and some cracks have egun to form, with the Dow down in the last week and some high-flying growth stocks – including several in the Stock of the Week portfolio – getting sold off today. With inflation data to come later this week, it’s possible a pullback of some kind is in order. So today, we add an inflation-proof stock that Clif Droke just wrote extensively about in his Cabot Turnaround Letter advisory.

Details inside.

The calendar has flipped, and so far the early-January effect has been in effect, with some volatile ups and downs, as well as some sharp rotation into and out of certain areas. Still, we always go with the evidence, and stepping back, not much has changed: For the overall market, the evidence is tilted higher, though growth stocks look worse, still in intermediate-term sideways-to-down phases for most names, but it depends where you look. Overall, we’ll leave our Market Monitor at a level 7 from here, but we’re flexible and will be keying off any breakouts or breakdowns among individual stocks.

Our first list of the New Year is a mix between strong growth titles, aerospace/defense-related names and cyclical stocks. Our Top Pick is a blue-chip growth name that has a history of stair-stepping higher over time—and whose stock just broke out from a three-month range last week.

It’s ugly again. The market recovered from the 10% correction bottom earlier this month. But it plunged again below the earlier low on Monday as tariff issues have taken center stage.

Hopefully, stocks will bounce off the low again, but it isn’t looking good right now. The tariff deadline is this week, and uncertainties abound. It is yet unclear how many countries will be included in the reciprocal tariffs and to what extent there will be exceptions. The market may be happier about things by the end of the week. But if it isn’t, stocks will likely go lower.

While in Amsterdam last week, I visited the Tulip Museum on a whim. It was small, but informative. Before leaving, I bought a book called Tulipomania, less because I’m riveted by tulips than because I was out of reading material and Dutch bookstores were closed for Easter Monday. The book, by...

WHAT TO DO NOW: Remain bullish, but continue taking things on a stock-by-stock basis. We’re seeing another round of sharp selling in many leading growth stocks today, though few (if any) have cracked meaningful support. To us, it’s another shot across the bow, not prompting any major moves but putting us on alert with certain names. In the Model Portfolio, we’re making one small move—selling 20% of our stake in CrowdStrike (CRWD)— while doing a quick flip on Celsius (CELH), placing it on Hold after last week’s half-position buy after today’s drop on news. Our cash position will now be 25%, and we’re keeping our eyes on a few names should the selling continue.

The week was ticking along pretty well until this morning’s first read of GDP (1.6% vs. expectations of 2.2%) came out and shot a small hole in the “at least the economy is doing well” argument that’s helped the market hold up despite persistent inflation data.

Embedded in the GDP report were Q1 core and headline PCE inflation, both of which were a little hotter than expected and up from Q4 of 2023. March PCE data will be out tomorrow and is expected to be the biggest macro news event of the week.

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In today’s note, we discuss the recent earnings reports from Walgreens Boots Alliance (WBA). Our note also includes the monthly Catalyst Report and a summary of the January edition of the Cabot Turnaround Letter, which was published a week ago Wednesday.

There was a lot going on in the market this week but news flow from our portfolio holdings was relatively quiet.

As we wrote in last week’s issue, we started to see some extremes out there when it comes to selling pressure, with a few different breadth-related measures nearly reaching levels seen at prior major lows of the past decade. And the major indexes did mostly hold their Monday lows for the rest of the week, even flashing an encouraging turnaround on Friday with a couple of minor positive divergences, before today’s pop higher. The question is how far this nascent bounce can go--so far the Nasdaq has bounced about 1,000 points after declining 3,100, and up action has been limited to just a day or so before the sellers are back at it. That can always change, of course—in fact, we think the odds are decent that it will—but our point is that the onus remains on the buyers to continue to step up to form a workable low the market can build from. In the meantime, we’re sticking with the same cautious stance, holding plenty of cash and keeping new positions small.



This week’s list is actually fairly mixed between sectors, with some commodities, some biotechs and some earnings winners. Given the environment, our Top Pick is Corning (GLW), which isn’t their fastest horse, but it has a solid business and a very good chart, having just enjoyed a nice buying cluster after earnings.

If you dug into any financial news this weekend, you were likely inundated by tons of bearishness that have arisen due to so many uncertainties, but when it comes to the market, it’s best to just keep it simple and focus on the action itself: The intermediate-term trend of the indexes and vast majority of stocks remains down, with only a few special situation names and some commodity-related titles able to buck the trend. We would say that, just in the past week, far fewer stocks joined the indexes at new correction lows, but we need to see such rays of light lead to real, sustained buying pressures to take action on them. We advise remaining defensive.


Not surprisingly, this week’s list doesn’t have many stocks near new high ground, but we are seeing many that reacted well to earnings and have shown some positive volume clues. Our Top Pick is one of them, a new name in the resilient shipping group.

Nio’s (NIO) stock is down 90% from its all-time high, does the current valuation make it a compelling buy for forward-looking investors?

While I don’t think we just saw the end of the run-up in technology stocks, I do think investors should begin to pare back their tech holdings and do these two things: raise cash, and buy undervalued stocks in other sectors.