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In his Fed semiannual testimony before the Senate Committee on Banking, Housing, and Urban Affairs, Federal Reserve chair Jerome Powell said, “Labor market conditions have cooled from their formerly overheated state and remain solid. Inflation has moved much closer to our 2% longer-run goal, though it remains somewhat elevated.”

Yes, it has. This morning, it was reported that stubborn inflation, as denoted in the CPI index, rose to 3.0%, a bit higher than the 2.9% economists had predicted.

Tariffs are here, and the market doesn’t like them. But how long are they here for? As this morning’s deal with Mexico to delay them by a month reveals, it’s possible tariffs are being used as more of a scare tactic than a permanent penalty. If so, that would be good for stocks. But the best thing to do with tariffs as an investor is to ignore them and focus on stocks that are performing well. And today, we do just that, adding a promising biotech that caught the attention of Cabot Top Ten Trader Chief Analyst Mike Cintolo.

Details inside.

The market is continuing its bumpy ride higher. Despite a barrage of concerns, 10 of the 11 S&P 500 stocks sectors are higher year to date.

On last Friday’s Cabot Street Check episode, the weekly podcast I co-host with my colleague Brad Simmerman, we welcomed on four different Cabot analysts to help us take the market’s temperature in the midst of an eventful and rather volatile start to 2025. All four of them – Mike Cintolo, Cabot’s Chief Investment Strategist; Jacob Mintz, our options trading expert; Tyler Laundon, our small-cap and early-stage stock expert; and Clif Droke, my fellow value investor who runs the Cabot Turnaround Letter – described themselves as varying degrees of “cautiously bullish.” Given all the headlines of late, that qualifies as a victory.

Other stocks are picking up the slack while technology is wobbling. The grossly lopsided performance that dominated this market for so long couldn’t last. And there’s more to the story than just sector rotation. Earnings are catching up.

I’m still bullish on the portfolio AI stocks. But other sectors of the market are overdue for stronger relative performance. These stocks are taking over and likely to post much better relative performance over the course of the year.

Healthcare is perhaps the best of all sectors that aren’t technology. It’s an all-weather industry that offers a very seldom-found combination of safety and growth. Plus, these stocks are poised ahead of the megatrend of the rapidly aging population. Healthcare demand is skyrocketing. And the best stocks should get a great ride.

In this issue, I highlight four healthcare stocks currently in the portfolio. Despite the lopsided bull market returns so far, a couple of these stocks have been among the very best performers. And now they should be poised for a strong run in 2025.

The catalyst that has driven this market higher for more than two years got punched in the face on Monday. Is it the end of the gravy train or just an overreaction?

Stocks came crashing down on Monday. The S&P 500 was down almost 2% and lost most of this year’s gains in one day. The tech-laden Nasdaq index fell more than 3%. It was all because of some upstart Chinese company.

The markets have continued their bullish momentum so far in 2024, with growth stocks continuing to lead the way—especially large caps, which are up 32.94% so far this year.

Sector-wise, Communication Services (up 9.74%), Technology (up 5.07%), and Healthcare (up 4.11%) are the winners so far, with Real Estate (down 4.37%), Utilities (-2.91%), and Consumer Discretionary (-0/83%) the losing sectors.

Housing inventory is still tight, with prices remaining a little lofty. The S&P Case-Shiller home price index came in at a 5.4% rise, which was a bit less than the 5.7% forecast, but still higher than the month before.

WHAT TO DO NOW: Continue to hold some cash as leadership stocks correct. For the here and now, things are getting trickier, but most leaders aren’t flashing big-picture abnormal action, and our market timing indicators are still positive; thus, we’re still taking things on a stock-by-stock basis while keeping a chunk of cash on the sideline. In the Model Portfolio, because we’ve already built up a 34% cash position, we’re being a bit patient to see how this week’s dip plays out—that said, we are switching CrowdStrike (CRWD), Elastic (ESTC) and Shift4 (FOUR) to Hold ratings and will take it day-to-day from here. Details below.

Passive real estate investing is surging in popularity as it promises the wealth-building power of real estate without the headache of managing properties and tenants. This month’s issue features the pros and cons of passive real estate investing, the types of opportunities available to investors, and what you need to know before you get started.