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Summer stasis has taken hold of the market as it often does this time of year, with the S&P 500 virtually unchanged (+0.3%) since the calendar flipped to July. Considering stocks entered the month at all-time highs despite a slew of existential threats (tariffs, high interest rates, two major overseas wars, etc.), holding the line counts as a victory.

Will it last? I’m guessing we’ll get a pullback of some kind – probably at least 5% – sometime in the next couple months, perhaps not until just after Labor Day, when institutional investors and hedge funder types return from their summer getaways in the Hamptons and Martha’s Vineyard and start selling out of their long-neglected weakest positions (a major reason why September is by far the worst month for stocks, historically).

The market remains under pressure as interest rates rise, which keeps us in a cautious stance -- we’re holding nearly as much cash as we have during the past two years as few stocks are able to sustain any upside. That said, we actually think the market has a solid setup here--there are a decent number of names forming normal launching pads, sentiment is awful and earnings season could be a catalyst. The bulls still have a lot to prove, but we’re remaining flexible should the buyers appear.


Tonight’s issue reviews our remaining names and market outlook in more detail, talks about some big-picture positives to keep in mind, as well as some things we want to see as a sign the buyers are taking control. More watchful waiting is needed, but we’re keeping our watch list up to date should the market’s character change.

The stock market has perked up considerably since the Liberation Day turmoil in early April, igniting shares of stocks across the market cap spectrum.

We look under the hood of five names that span the risk spectrum this month, including a couple of old names that might be familiar and a new one that’s been hard to ignore.

The market’s brief rally ran into a wall last week, and while the major indexes found some support near their March lows initially, today’s tariff-induced plunge put an end to that. While the headlines and news items are hitting the wires fast and furious, we urge you to stay focused on the evidence--doing so is why we were nearly 60% in cash the day after the market’s February top and why we’ve been north of 80% cash in recent weeks, shielding the portfolio from the worst of the decline. Tonight, we are forced to sell one of our remaining small positions, which will boost our cash hoard to the upper-80% range.

For now, we’re comfortable remaining in our storm cellar, but while the news and action is awful now, there are some rays of light out there (like falling Treasury rates), as well as many stocks that are etching higher lows right now while the market does the opposite (see more in tonight’s issue). Eventually, this down period will give way to a great money-making opportunity, so keep your head up--but stay defensive for now.

The market keeps improving but is not necessarily back to 2021 or even June and July 2023 levels just yet, as many individual stocks are stuck in neutral. Fortunately, that’s not the case in the Stock of the Week portfolio, as eight of our holdings are hitting either 52-week or all-time highs! Today, we try and strike while the iron is hot – or at least warming – by adding a familiar growth stock that was a market darling during Covid, had a very rough 2022, but has now gotten the attention of Mike Cintolo in Cabot Top Ten Trader after a major gap up at the end of October.

Details inside.

In the November Issue of Cabot Early Opportunities we lean into the strengthening market with a group of companies doing everything from providing security for new AI applications to paving roads in the Sun Belt to making packaged foods for health-conscious consumers, and more.

As always, there’s something for everybody!

After a punishing three-week decline, the market has stabilized a bit, and we’ve actually seen some secondary positives, too, with a short-term positive divergence in our Two-Second Indicator, falling Treasury rates and some big dips in investor sentiment. That said, both the markets intermediate-term and longer-term trends are pointed down now, and while there are some resilient stocks out there, most names are also buried beneath key levels. A bottom-building process could be underway, and big-picture, we don’t view this downturn as unusual (see more on that in today’s issue), but for now, we’re staying defensive with a big cash hoard, waiting for the market to change character.

Despite the recent dicey market, there are two great opportunities created by a weird interest rate move that is likely to correct itself in the months ahead.

The yield curve, defined as the difference between short- and long-term interest rates, has flattened as the benchmark 10-year Treasury rate has fallen. The rate has fallen from 1.75% in February to the current 1.31%, despite the stronger economy and persistent inflation.



I believe rates have moved far too low. Interest rates are still well below what has been defined as normal for the last decade. The 10-year rate is still well below the pre-pandemic level. Plus, the benchmark rate averaged between 2% and 3% during both the Obama and Trump Administrations.



Interest rates have fallen too far and are likely to trend higher in the months ahead. Two portfolio stocks benefit from the difference between short and long rates and have been held back by the falling rates. These stocks are likely to move higher as the situation reverses

In the September Issue of Cabot Early Opportunities we continue to focus on tech stocks, while adding a small-cap biotech stock into the mix. We also review some of our portfolio management musings from last month.

Enjoy!

The market had a great, bullish setup a couple of weeks ago, but that rally has fallen flat, which is a red flag. Our Cabot Tides and Two-Second Indicator remain negative, and we’re now seeing the selling spread even to resilient growth stocks.

The market has done a good job of holding its strong early-May upmove, and that’s kept both of our trend-following market timing indicators in positive territory. That said, what we really want to see going forward is upside follow through from the major indexes and leading growth stocks, which would go a long way toward telling us the three-month correction is over.

The market’s action since its late-June shakeout has been solid, with the major indexes and many leading stocks pushing back toward new high ground. Granted, not everything looks perfect, but the majority of evidence remains positive, including our trend-following indicators, so we remain mostly bullish.

There are a few yellow flags out there, from short-term sentiment measures to a weakening broad market (our Two-Second Indicator is again unhealthy), but the trend of the major indexes is firmly up, and the action of growth stocks has been terrific, including a bunch that have surged on earnings in recent weeks.

The Model Portfolio is more than 90% invested and off to a good start this year. In tonight’s issue, we write about our newest addition and the excellent relative strength it’s shown in recent months; we think it’s a liquid leader of the new energy rally. We also write about some recent IPOs, other stocks we’re watching and, of course, dive into all of our recommended names.

It’s a New Year, but the market’s evidence remains unchanged--big picture, it’s a strong bull market, though short-term risks are rising, telling us to be choosy on the buy side and to hold a chunk of cash. That said, we’re still holding on tightly to our winners and think a few of our current stocks can enjoy sustained runs from here.

In tonight’s issue, we write about how many stocks that have recently had big moves actually look to be early in their overall advances; pullbacks, in other words, should offer buying opportunities. We also dive into our stocks and write about a couple of names on our watch list could be our next buys.

There is a brand new industry just coming of age.

New industries only come along once in a while and they almost always present an array of investments that will be superstars of tomorrow. We dream of going back in time and buying Microsoft (MSFT) or Starbucks (SBUX) or Netflix (NFLX) when they were new, upstart companies. But we might get another bite of a similar apple in 2020.

We enter 2020 in a tricky situation. It is very late in the recovery and bull market and the market is near an all time high. While the bull market is likely to last a while longer, this still isn’t a great place to be in general. However, while the overall market is expensive there are rare pockets of great value.

In this issue I highlight a shipping stock that has remained profitable and paid dividends every single quarter through an industry depression. That company is yielding a massive 9.6%. And industry conditions are improving. It may be 2020 in the overall market, but I found a place where it’s 2009 again.

In this issue I highlight a company that has been investing in infrastructure assets all over the world. The stock has doubled the return of the S&P 500. And business will only get better.

The market continues to slowly slog higher in the dog days of the summer. It’s a time of year when investors are more focused on squeezing more fun out of the last days of the summer than investing. Markets seem to behave the same way they did when investors stopped paying attention. In this case it likely means a higher crawl until Labor Day.
Of course, an outside event can always change things. We’ll see what happens with today’s Fed rate decision. But unless something rocks the boat, markets will probably remain on autopilot for the next month or so.

“Hertz Global Holdings, Inc. (HTZ NYSE) is in the fast lane. The rental company, with a fleet of nearly 760,000 cars, operates roughly 10,400 locations in about 150 countries. Hertz also rents equipment, while a separate unit offers fleet-management services. The car-rental industry has consolidated in recent years, leaving only...