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Stocks started this week on a strong note. After sluggish performance over the past month, the S&P 500 is gaining steam.

Investors are focusing on the promising earnings season and a tamping down of tensions with China. The Trump administration has moderated its stance on China and will meet with them in the weeks ahead. Meanwhile, earnings season is heating up with Tesla (TSLA), Intel (INTC), Netflix (NFLX), and Coca-Cola (KO) reporting this week.

While the outlook for 2025 is positive, things are changing.

Sure, this bull market has driven the S&P 500 nearly 70% higher. But most of the gains are from technology stocks. Until this past summer, nearly all the bull market returns were driven by technology. The rest of the market had done very little.

But the rest of the market is waking up. While artificial intelligence (AI) will likely continue to be a powerful growth catalyst, its dominance over everything else might not be as pronounced in 2025 as it has been in the past. Earnings for other stocks are catching up.

The earning growth difference between the “Magnificent 7” companies and the other 493 S&P 500 companies is expected to plummet from 27.8% last year to 8.3% this year. The rest of the market is cheap, has momentum, and will likely get hot this year as stocks experience an earnings growth spike that could last for years.

In this issue, I highlight a healthcare stock that looks highly promising in 2025. It is poised in front of the aging population megatrend, which makes a successful pick so much easier, and it will likely experience a sizable earning spike in the years ahead. It is an existing portfolio stock of which half the shares were sold last year. It’s a great time to buy back the other half.

The market sobered up in December after a big post-election rally in November. The S&P fell 2.5% in the last month of the year. But January has started out with stocks up 2.2% already.

Technology is driving the market higher. The sector is taking off after Nvidia (NVDA) issued bullish statements about demand for its artificial intelligence chips. AI is a huge growth catalyst for the market’s largest sector and has proven it can drive the indexes higher all by itself. In fact, technology has been the primary catalyst for the S&P over most of this bull market. But things might be changing.

After a strong start to the year, February was a down month for the S&P 500. The index is just a little over 1% higher YTD. But the news is better than it may seem.

Sure, the market has been struggling. But it’s only because of technology, which is down over 5% YTD. Nine of the other ten sectors in the S&P are positive for the year. Some sectors are having very good years as Health Care is up over 8% and Consumer Staples and Financials are up over 7% YTD.

One of my readers recently took my advice and negotiated his options rates with his brokerage provider. I thought I would share with you his results.

While some major indexes are hanging in there and many cyclical areas look pretty good, growth stocks have suffered another sharp leg down, with many with crash-type declines last week. With that said, there are some rays of light, including a minor new lows divergence, continued buying bursts that usually portend solid long-term results and the fact that some cyclical areas are trying to get going from big consolidations. Monday’s panic selling might be a workable low, but still, we need to see more before putting much money back to work.

The bull market is alive and well, though frothiness and investor exuberance are reminders that you shouldn’t leave your brain at the door. Always remember to manage your risk.

Speaking of risk, today’s recommendation is more speculative than most of our recommendations, so if you invest, start small. The sector it’s working in is hot, the story is interesting, and the stock’s chart is solidly positive, without being overextended, so I’m intrigued.



As for our current holdings, I’m selling one stock that achieved its target (good) and one that continues to decline and is now our biggest loser (bad).



Details inside.

We got a great response to Wednesday’s Cabot Wealth Advisory about Peak Oil, and many of the responses are reproduced in today’s issue.

Last week I told you that we’d received a new buy signal from our intermediate-term market-timing indicator—but it didn’t last long. The market’s widespread selling on Wednesday and Thursday quickly turned it negative again.

So capital preservation is once again of primary importance—though the charts say the time is ripe for at least a modest bounce.

It has been a busy week in emerging and global markets.

The MSCI Emerging Markets ETF (EEM) remains in a negative position, just below 20-day and 50-day moving averages. Our portfolio has a 35% cash position and maintains 10% allocation to an ETF that moves opposite the EEM.

U.S.-China turbulence led to a rollercoaster week for global stocks with some recovery during the past couple of days. Our Emerging Market Timer has turned negative, as EEM has fallen below both its 25-day and 50-day moving averages.

Several of our portfolio companies posted strong earnings this week and the portfolio is already in a conservative stance. We have a new recommendation today that will diversify the portfolio and give us exposure to a country with a youthful population and a robust economy.

It is useful (if also humbling) to review how our prior year’s forecast turned out.

In this issue, we take a look back - and a look forward - as we assess our moves.