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Current Market Outlook


It came on low volume and Independence Day made it just four days, but last week’s trading action was encouraging, with the major indexes generally holding key support early in the week and then bouncing nicely into the weekend. By our measures, the intermediate-term trend is still tilted up, and while there are fewer stocks hitting new highs than there were a few weeks back, there remain many stocks in good shape. With the improved evidence, we’re nudging our Market Monitor up a notch to 7; like we just wrote, last week was encouraging. But we also want to see how the indexes and leading stocks handle themselves now that big investors are back at their desks and earnings season gets underway.

This week’s list is again heavy on growth-oriented stocks, including a couple of newer names we haven’t seen before. Our Top Pick is Vertex Pharmaceuticals (VRTX), which has surged toward the top of an 11-month consolidation. We’re OK starting small and adding more if shares advance.

Stock Name	Price	Buy Range	Loss Limit
AeroVironment (AVAV)	80.48	68-71	61-63
Carrizo Oil & Gas (CRZO)	24.03	28-30	25-26
Dexcom (DXCM)	421.36	96-100	87-89
iRhythm Technologies (IRTC)	51.15	84-87	76-78
Lululemon Athletica (LULU)	304.69	122-128	112-115
Novocure (NVCR)	0.00	31.5-33	28.5-29.5
Shake Shack (SHAK)	92.08	62-65	55-57
Twitter (TWTR)	40.37	42-45	37.5-39.5
Vertex Pharmaceuticals (VRTX)	230.36	169-175	158-161
Yext Inc. (YEXT)	21.32	18.5-19.5	17-17.5

In the fourth quarter of 2018 it felt like we all finally succumbed to some festering illness that landed us in the intensive care unit. Thus far, the beginning of 2019 has the feeling of a trip home from the hospital and the beginning of the healing process.

The biggest thing happening is the change in fiscal stimulus and interest rate policy. Yesterday the Fed said it intends to accelerate the tapering process by reducing purchases by $30 billion a month (from $90 billion to $60 billion) starting in January. This is half of what was being purchased a few months ago. The program is on track to end by March 2022.

Holding too much cash in your portfolio has been an expensive mistake for the last few years, and that won’t change in 2026.

MercadoLibre (MELI) is No. 4 in my five-part series on the best emerging market stocks to buy right now. It’s the eBay of Latin America.

The market correction finally arrived swiftly in recent days. If you set aside cash with which to buy low, it’s okay to begin deploying some of that cash. In today’s issue we have one new addition to the Buy Low Opportunities Portfolio.

Three days does not make a trend in any way, shape or form. But, rejuvenated by a stalling/pullback in yields, growth stock bulls have pulled themselves up off the mat and appear ready to defend their turf – at least for now.

This week Chris and Brad talk about the latest Chinese GDP numbers and whether it’s safe to invest in China, Tesla’s earnings release, and what they’re seeing with Regional banks now that they’re reporting. After that, they break down FAANG stocks, their popular ascent as market shorthand, and whether Microsoft is “sexy” enough to sit at the cool kids’ table.

After a strong rebound early in the week, markets sold off a bit over the past two days as investors battle uncertainty on the virus and economic impact fronts. We remain positive on our seven Cabot Global Stocks Explorer stocks and will put some of our 35% cash position to work today with a high quality Singapore bank many of you are familiar with. Our emerging market signal stays negative.

Also, I have a special alert regarding Luckin Coffee (LK), which is down very sharply this morning.

Within the span of the weekend, Yevgeny Prigozhin, head of mercenary army Wagner Group, launched a highly publicized and well-armed takeover attempt against Russia’s Vladimir Putin-headed government, then melted away into the murkiness that is the Kansas-sized Republic of Belarus.

Artificial intelligence is everywhere these days, from your email spam filters to customer service chatbots to phone systems, but does it belong in your portfolio? This month, we’ll learn more about the growing use of AI in day-to-day life, how it operates, how companies are leveraging artificial intelligence to manage investments, and whether you should trust these automated tools to make (or help you make) investing decisions.

Most of the market’s evidence remains bullish, so we remain optimistic that higher prices are ahead; the Model Portfolio is more than 80% invested in nine strong stocks. That said, it’s not all peaches and cream, as some key indexes are again testing their 50-day lines and we’re still in the thick of earnings season.

The market is relatively flat so far this week as more traders head home for the holidays. Coming into Wednesday, most major indexes were within 1% (up or down) of where they closed last week, though many growth stocks have picked up steam.

The flavor of the market hasn’t changed in the last week, in my view. There is still a sense that many high growth stocks have run too far. I think the lesser-informed general public hears about the recent slide in the mega-caps (AAPL, AMZN, MSFT, FB, etc.) and thinks they are “the market,” and that since they’re going down the market is in trouble.

The market remains strong and cohesive and thus I remain bullish. However, numerous indications remind me that the market is overdue to deliver a painful shock to investors, so today I’m leaning back to the conservative side, recommending a dividend-paying stock that has solid long-term prospects and minimal downside risk.

Today’s recommendation is a case in point. After a long three-year waiting period, the stock broke out to new highs yesterday and followed through today. The stock’s name will probably be familiar to you; its story is certainly interesting.