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It’s the last week of August, which means a few things. Volume in the market is drying up as most investors enjoy the last couple of weeks of summer.

Why dividend-paying stocks are important to have in your portfolio.

Every few months I like to do a frequently asked question (FAQ) issue for Cabot Wealth Advisory. The reason I’m able to do this is that I’m available to subscribers--every editor answers many emails each week, so we have a pretty good idea of what’s on subscribers’ minds. I find the FAQ both makes for a good read and helps me think through some of the most common and intriguing questions out there. A quick note before I start, the answers to these questions are from my growth stock and market-timing perspective. So without further ado, on with the show.

Today I want explain the product we introduced 10 days ago called Cabot ETF Investing System.

The market took another hit this morning, but like yesterday, the major indexes have found support as the day has progressed—just after 3 pm EST, the Dow was down 70 points while the Nasdaq was off 66 points. Part of the reason for the recent selling is supposedly due to inflation fears and higher interest rates—indeed, the 10-year note reached north of 1.30%, which is low historically, but up 30 basis points (0.3%) since late January and 50 basis points (0.5%) from the start of December.

Whether this is a quick V-shaped pullback like we saw after Brexit or a more serious correction will become apparent in coming weeks, but I suggest you become a little more conservative while we wait and see. We’re selling half of CVS Health (CVS) and J.M. Smucker (SJM) today and putting Home Depot (HD) on Hold.

Everybody’s focus is on the high-stakes chess game the U.S. and China are playing with respect to trade, and the upcoming Uber IPO. But behind the scenes there’s a nice little rally going on in a certain group of small-cap stocks!

I recommend you take rate hike expectations and macro-economic predictions with a grain of salt (they’re fickle things), focus on stocks that are working well, and keep your goals and risk tolerance in mind.

The market is healthy and investors should be bullish. For our part, we’re putting one stock back on Buy today. Investors looking to put money to work should also consider these five stocks, which all look healthy and strong today.

The broader U.S. stock market is having a pullback after a 12% post-election run-up. The S&P 500 is only down about 2.5% from its recent high, and it’s too soon to tell whether it might fall a little more.

This feels like one of those markets that you’re not sure you should trust given how volatile it was in February. But the combination of revenue growth, earnings growth and decent charts, especially among growth stocks, suggests it’s best not to try to predict too far into the future. For now, the evidence in front of us favors the bulls.

With the market on track to post a very nice gain in November, it’s been a good time to just sit back and let most stocks do their thing. Much of this move has been driven by lower yields and peak Fed chatter, with inflation and economic data largely supporting the disinflation and soft-landing scenario.

Whether or not the Fed will ultimately begin to cut rates next spring/early summer remains to be seen, but that’s what the market is currently expecting. We’ll now look to the December 12/13 FOMC meeting (last of the year) for Jerome Powell to repeat his “not thinking about thinking about cuts” shtick.

The Federal Reserve, or “the Fed,” is all investors can talk about these days. So, let’s explore what it is, what it does, and why it matters to investors.

Cannabis stocks are about to make a big move over the next several weeks. This is a good trading opportunity.

What is going to send the group higher?

The Senate should take significant steps to advance key bank sector reform that would help cannabis companies, say lobbyists.

WHAT TO DO NOW: Continue to put money to work, albeit in a step-by-step fashion. From a top-down perspective, our market timing indicators continue to improve, with all three of our key measures (Trend Lines, Tides, Two-Second) now positive. Individual growth stocks are acting well, though many are still repairing the damage of the past few months. Thus, we’re optimistic, but want to see continued improvement to pull us into a heavily invested position. In the Model Portfolio today, we’re going to buy a half-sized position in Arista Networks (ANET) and add another 3% stake to Duolingo (DUOL), leaving us with around 44% in cash.

Explorer stocks gained or held their ground this week as the so-called “Mega-Cap 8” stocks dominate a narrow market for now.

China has become the 20% market – 20% of world GDP and 20% of multinational total revenue. This explains the steady stream of CEOs to China while Washington and Beijing top officials traded insults at a Singapore defense forum.

The Explorer had a good week with Butterfly (BFLY) up 15% and Solid Power (SLDP) up 10% this week. The S&P 500 has risen 8% in 2023 but the market gains are very narrow and concentrated, with the top five stocks accounting for most of the gains.

Consumer prices in April showed inflation pressures remain high but backed off a bit. The consumer price index came in at 4.9%, slightly less than the 5% from March. Not a big deal but a step in the right direction as the below graph highlights.

Electric vehicle (EV) prices and profits are also going down for the most part. Tesla reported $2.5 billion of profits in the first quarter, down from $3.7 billion in the last three months of last year, and $3.3 billion in the first quarter of 2022.

Election season lurks just around the corner.

The looming midterm outcomes have huge implications for cannabis – since the group is so dependent on legal reform in the hands of politicians.

There are going to be plenty of (tradeable) election-related ups and downs. But for reasons I will explain, cannabis stocks might see some very bullish catalysts near term, no matter which party takes the Congressional elections.

You can still find sky-high yields.

Despite the recovery in the overall market, there are still lingering pockets of high yields. It reminds me of the years following the financial crisis. You could still find good stocks that paid a sky-high income relatively easily. But the situation didn’t last. Those high yields on quality stocks evaporated as investors realized the opportunity.



Some of the current high yields probably won’t last long either.



At the same time, it’s a great time for cyclical stocks. The economy is still booming. Plus, we are likely at the point in the economic cycle where such stocks tend to do best. We are likely still in the early stages of a bull market and recovery.



In this issue, I found a stock that benefits from both opportunities. It has a stratospheric 11.5% yield that likely won’t last. At the same time, the yield should be safe and growing as the company is highly cyclical.