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The market has rallied for more than a year in the happy space between inflation and recession. But that dynamic is unlikely to persist. Amid persistent inflation, it is likely that the market will have to contend with high interest rates or a faltering economy. Each one is problematic.

In a flatter or faltering market, dividends provide a bigger part of total returns. Let’s get ahead of the curve and get a big fat yield.

In this issue, I highlight a stock with a massive dividend yield that has shown good price stability for several years. The company can also thrive amidst inflation and high or rising interest rates and can provide a high income return even if the market struggles through an inflation/recession catch-22.

The market has been terrific. And it will probably finish the year higher than it is now. But there is reason for caution.

Because of sticky inflation, interest rates remain near the highest levels in 20 years and may continue to stay high or go higher, until they drive the economy down. A hugely contentious presidential election is about to take place. And there are two significant global wars going on.

Steep selloffs are common even in markets that rise over time. The S&P 500 doubled over the last five years. But it crashed 30% in record time at the onset of the pandemic in 2020. There was also a bear market in 2022 during which the S&P fell over 20% and the Nasdaq plunged well over 30%. Of course, most stocks were down a lot more than the indexes. If you targeted some of the very best stocks at fire sale prices you could have gotten amazing returns.

In this issue, I highlight a way to target the purchase of the very best stocks at fire sale prices amid market turmoil that may occur from the potentially market-roiling issues this year or next. Most investors don’t buy when the market is crashing because it’s natural not to want to try and catch a falling knife. But there’s a way to take emotion out of the equation and calmly plot a way to fantastic returns.

Note: Because of the Martin Luther King, Jr., holiday, next week’s issue will be published on Tuesday, January 18.



While the S&P 500 hit a record high just last week, the market is being hit hard today, and thus I have two sell recommendations, AMBA and FND.



But I also have a new recommendation, which has the potential to be a big winner as the world increasingly values what this little company produces.



Details inside.

We remain in a confirmed bear market, so caution is still appropriate.
But there’s always something interesting to consider buying, and this week’s recommendation is a young stock with a good story, which involves helping the oil and gas industries use water more efficiently.


As for the current portfolio, which is 25% in cash, there’s one Sell.


Details in the issue.

The market remains healthy and thus I continue to recommend that you remain fully invested in a diversified portfolio. My last two recommendations were chip companies that consumers can’t really “see,” but this week’s recommendation is a consumer-facing company, so you can easily “kick the tires.”
As for the current portfolio, there are no sales, but four stocks get downgraded to Hold, for various reasons.


Details inside.

With the market continuing to improve, and chip stocks increasingly in demand, we add another chip stock (a very established one) to the portfolio today.
But we’re selling one stock too (VECO), taking profits and looking to reinvest them in something with greater potential.


Details inside.

With the market bouncing strongly last week, we leave our previously cautious stance behind and jump on a fast-growing, young chipmaker today.
And we’re not selling a thing, because after the February weakness, which saw a lot of irrational panic selling, the buyers are now back in charge and stocks are moving higher.


Details inside.

In addition to a detailed explanation of the market’s moves and our portfolio’s holdings, we write about the puzzling failure of the average investor to take part in the equity rally and how to handle stocks around their Initial public offerings.

The market tends to be lackluster in the late summer. But that goes double for the last week of the summer.

Unless there is a riveting headline, the overall market is likely in a holding pattern until the rubber hits the road next week after Labor Day. Sobered up investors back from vacation will take a fresh look at things after they wrap up the summer and come back from vacation. What will they see?

The market is starting this week higher on optimism about a “soft landing.” But the CPI inflation number for August that comes out on Wednesday could derail or support the rally.

Things seem upbeat Monday morning. Treasury Secretary Janet Yellen said on Sunday that she is “feeling very good” about avoiding a recession while still reining in prices. Of course, she called inflation “transitory” in early 2021. There were also some encouraging numbers about the Chinese economy. Also, the Fed is widely expected not to raise the Fed Funds rate later this month.

Earnings season is about over. And the end of the summer is upon us.

This is a weird time of year for the market. Investors tend to pay less attention because many of them are focused on trying to squeeze in the last bit of summer fun and laxness before it slips away. The market tends to do whatever it was doing before people stopped paying attention.

It was going sideways, and that is what it will likely continue to do for the next several weeks. Of course, a major headline could certainly change that. But most often these waning days of summer tend to be less eventful.

The good times are here again. The S&P 500 is up over 19% YTD and is now within just 4% of the all-time high. Stocks are in a strong uptrend that began in the beginning of May and appear likely to move still higher.

Inflation is crashing. The Fed is about out of bullets. And there is no recession in sight. Things could always discombobulate down the road. But there doesn’t appear at this point to be anything ahead in the next month or so that will change the current positive narrative.

Even the temporarily averted government shutdown can’t do much for this market. The S&P 500 is now down more than 7% from the 52-week high and may be headed to correction territory, down 10% or more.

The main problem is high interest rates. The benchmark ten-year Treasury rate continues to rise and just hit a new 16-year high near 4.7%. The Fed’s recent statement that interest rates will remain higher for longer continues to demoralize investors.

Stocks had a good week, but dark debt-ceiling clouds are gathering. The closer we get to the early-June deadline without a deal, the more likely we are to see some selling, at least if 2011 is any guide. To prepare for such a scenario, today we add a bit of safety in the form of a master limited partnership (MLP)-adjacent play on America’s infrastructure boom. It’s a recommendation from Cabot Income Advisor Chief Analyst Tom Hutchinson, and it’s hitting new 2023 highs as I write this.

Details inside.

Sure, it was a tough year for stocks. But 2022 was the worst year ever recorded for bonds.

The benchmark 10-year Treasury lost more than 15% in 2022, the worst calendar year performance ever recorded since it started being tracked in the 1920s. The 10-year + Treasury Bond Index lost 29.45% for the year, also the worst performance on record.

But the disastrous year creates an opportunity. Last year seems to have squeezed many years of poor performance into one. Now bonds actually pay decent interest again. And every negative year for bonds ever recorded has been followed by a year of positive returns.

In this issue, I highlight a long-term corporate bond fund. It allows access to some of the highest yielding investment grade bonds in the last 15 years while also providing a monthly income. The fund is very likely to have a positive total return for the year, and perhaps very positive, at a time when the stock market is highly uncertain.

It is reasonable to expect a significant market turnaround sometime next year. The market trends higher over time. And bear markets always give way to bull markets. Things should get a lot better in 2023. But there is a strong chance they get worse first given the current uncertainties regarding inflation, the Fed, and a recession.

Of course, a recovery and new bull market should reward the short-term pain handsomely over time. As a longer-term investor, which dividend investors should be, it should just be short-term noise on the way to long-term profits. But we can do better than just riding out the storm. We can exploit another possible market downturn to our advantage.

It’s a fact that many stocks that get hurt the worst in a bear market are the first to recover when the market turns. In this issue, I highlight a phenomenal cyclical stock that had been a market superstar but has been clobbered in this bear market. The stock is targeted at a low, low price that may be reached if the market falls to a new low. It could provide incredible upside leverage ahead of a market recovery.

Inflation is going on. And it’s starting to sink in. Oil prices are soaring. Interest rates are rising. And the Fed is going to have to be more aggressive than previously anticipated about raising rates and reducing stimulus.

January was the worst month for the market since March of 2020. The S&P 500 was down 5.38% and the technology-heavy Nasdaq fell 10% for the month. But stocks are recovering so far in the first week of February as earnings come to the rescue.

It’s official. We are in a correction.

The S&P 500 fell 10% from the high on a closing basis earlier this week. In and of itself, a correction is normal in bull markets, especially considering the current circumstances. After a massive 100% move higher in less than two years, a correction might be considered healthy.

After a good day yesterday, stocks have resumed the decline.

The Russia/Ukraine thing abated yesterday, and the market was thrilled. The thrill is already gone, and investors are back to worrying about inflation and a tightening Fed.