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It’s been a good month in the market, so far. The S&P 500 has regained all the dip from April and is now within a whisker of the all-time high. The driving forces have been an improving interest rate story and solid earnings.

With 92% of S&P 500 companies having reported, earnings increased an average of 5.4% over last year’s quarter. But it’s better than that. If you take out the report of Bristol-Myers Squibb (BMY), average earnings growth would be 8.3% for all the other stocks on the index. That’s a strong gain.

The market has been good for a while. The S&P 500 is up roughly 11% YTD and about 30% since late October. But I expect choppier waters ahead.

The main driver of the S&P has been the technology sector, which is being driven higher by the artificial intelligence catalyst. Most of the rest of the market seems to be at the mercy of the interest rate narrative. And that seems to change every couple of weeks nowadays.

What had been a tug-o-war between the souring interest rate narrative and earnings excitement is showing signs of veering in yet another direction.

The news on both inflation and the economy has been worse. The Fed’s favorite inflation gauge, the Personal Consumption Expenditures Index (PCE), came in higher than expected at 3.7% last week. Inflation continues to creep higher this year. And that’s with interest rates already at the highest level in decades.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Alcoa (AA), American Airlines (AAL), Berkshire Hathaway (BRKB), Brookfield Wealth Solutions (BNT), GE Aerospace (GE), Pan American Silver (PAAS), Starbucks (SBUX) and Toast Inc. (TOST).

Like many coffee aficionados, I have something of a love/hate relationship with Starbucks (SBUX). My main gripe is that the company’s food and beverage offerings have always been pricey compared to the fare served in most fast-food restaurants and run-of-the-mill coffee houses.

May the buyouts begin. Poor sentiment has pushed the values of cannabis companies so low, the strong are now buying the weak. Like the recent cannabis company insider buying, this is a signal that valuations may be close to bottoming here.

However, realistically, it could be a while before the sector recovers since we are dependent on politicians for progress.

The market rally is forging ahead and making fools of the doubters, despite the Tuesday pullback. The S&P 500 is up 20% since late October and 7.5% so far this year as of Monday’s close.

It’s been a good start to the year, with the S&P 500 up more than 3% so far this month. Of course, that’s a big slowdown from the breakneck pace of advancement in November and December. But that’s to be expected.

Just when the market appeared vulnerable to selling pressure, news from an unexpected source rode to the rescue, lifting stocks.

On Tuesday, the Labor Department announced that inflation rose 2.7% in July from a year earlier, which was the same as the previous month and up from a post-pandemic low of 2.3% in April. “Excluding the volatile food and energy categories, core prices rose 3.1%, up from 2.9% in June,” according to the Associated Press.

The Fed’s latest roundhouse to the market this week has caused another round of selling, but we think more damage was done to sentiment to this point than the evidence; we remain defensive and patient, but we’re also keeping a close eye on things, as a few good days (and some real breakouts from potential leading stocks) could give us something to work with.

In the meantime, we sit with just two stocks but are spending many hours filling up our watch list and monitoring earnings season for new potential leaders. We’re eager to add some exposure, but we’ll wait for things to stabilize first; in the meantime, check out all our latest thoughts in tonight’s issue.

In the September issue of Cabot Early Opportunities, we continue to try and thread the needle of this bear market, selecting a few potential opportunities to buy while adding others to our Watch List.
This month’s issue features a couple of old friends that are shaping up again, plucks one healthy stock off the Watch List and digs into two fresh names that seem to have the wind at their backs.


Enjoy!

The stock-market picture continues to improve, and it’s possible the current rally is more than yet another head fake; it could be the start of a new bull market. While we’re not there yet, there’s reason for optimism. So today, we take another big swing by adding a fast-emerging electric vehicle maker that has struggled since its IPO last June but is showing signs of life lately. It’s a recent recommendation from Cabot Explorer Chief Analyst Carl Delfeld.

The market has been stagnant for the last month, but that’s not necessarily a bad thing. It could be a nice, long deep breath – in what is historically the market’s worst-performing month – before the next big push in this still-new bull market. But just in case it goes the other direction, today we add a low-risk utility stock that’s having a down year but tends to beat the indexes over time. It’s a longtime favorite of Cabot Dividend Investor Chief Analyst Tom Hutchinson.

Details inside.

Stocks had their first legitimately good week since July, thanks to declining bond yields, improving earnings and – surprise! – Jerome Powell. Can the market keep the momentum going? I’m betting yes, even if it’s not a straight line. Market bottoms frequently occur in October, and this year will be no exception. Therefore, today I’m adding more growth to the portfolio in the form of a mid-cap name that’s little known to the masses but is essentially the Google search engine for big corporations. It’s a new recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Enjoy!