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The market is at a crossroad.

It is possible that we could get through this cycle soon and without a recession. The market could rally to new highs without much more trouble. On the other hand, a more hawkish Fed or deeper economic downturn than currently anticipated could cause another market plunge.

You could just bet on one scenario and hope for the best. But there might be a better way to navigate these waters. Instead of gambling on a certain outcome, we can buy stocks that should thrive in both bull and bear markets.

In this month’s issue, I highlight four current portfolio positions that are “all-weather” stocks. These stocks should do just fine if the market takes off and doesn’t look back in a soft landing. But they should also perform relatively well in case a more ugly scenario unfolds. They should be solid in almost any kind of market environment and pay you a great income in the meantime.

With all of our stocks now having price targets assigned to them, we thought we’d share with you some of our process behind how we set those price targets.

Today’s note includes earnings updates on 12 companies, the podcast and the Catalyst Report. We publish the Catalyst Report on the Friday after each monthly issue of the Cabot Turnaround Letter. There were no changes to any of our ratings this week.

The market is in the midst of a short-term consolidation, which usually dishes out some pain and offers tedious action, which is what we’re seeing so far—earlier this week, we cut bait with one stock and have tight leashes on a couple of others. Further near-term shenanigans are possible, even likely, so we’re taking things on a stock-by-stock basis, but we’re also not opposed to putting money to work in resilient leaders—which we’re doing tonight, starting a half-sized position in a name we’ve long thought has the characteristics of a future winner.

In the June issue of Cabot Early Opportunities we add a conservative stock from our Watch List that’s acted well over the last month and also take a partial position in an emerging player in the energy space. We also refresh the Watch List with a pure-play beverage stock, a biotech stock with a big date in November and another emerging energy name.
Enjoy!

Under the surface, there does remain some encouraging signs for the overall market, which is a good reason to keep your antennae up for a change in character. But at the end of the day, what counts most is the action of the market and potential leading growth stocks, and on that front, there’s no question the trends are down and the sellers are in control. Thus, we remain cautious, holding 60% of the Model Portfolio in cash, and while we’re not anxious to sell wholesale, we won’t hesitate to sell more if stocks continue to crack.


In tonight’s issue, we review some key measures that show just how severe this selling wave has been in recent months--and why, once it’s over, it should lead to a fresh bull market in growth stocks. We also highlight some new ideas in commodities and elsewhere while we continue to fine tune our watch list.

Everything You Ever Wanted to Know About Tariffs but Were Afraid to Ask

Yesterday’s Federal Reserve meeting and Tuesday’s consumer price index data showed inflation and interest rate hikes are pausing but remains well above what markets would like.

Overall inflation is cooling in large part because energy prices have fallen sharply — a huge relief for consumers. But the core gauge, which excludes energy and food prices, shows inflation is still too high.

Nevertheless, investors welcomed the news as it spurred markets and confidence that the market performance might advance beyond big tech and the artificial intelligence (AI) story.

This week, we comment on results from Duluth Holdings (DLTH), the last of our companies to report this earnings season.

We also include the Catalyst Report and a summary of the September edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.

The technology sector is on fire. Before the market opened on Tuesday, the sector was up 5% for the past week, 15% for the last month, and 34% YTD. It’s also up more than 2% on Tuesday. What happened?


The outlook for many sector stocks greatly improved last Thursday. AI, or artificial intelligence, had been seen as a huge growth engine going forward as companies invest heavily in the technology. Those growth projections got a huge shot of adrenaline and the AI phenomenon got real when semiconductor company Nvidia (NVDA) reported earnings last week.

Explorer stocks were steady or slightly down this week but don’t get discouraged. It is likely that Fed interest rate hikes have ended and, combined with a debt ceiling deal, could ignite a rally. Next week I will give an update on our three Explorer ETF positions.

The unemployment rate for Chinese people ages 16 to 24 rose to a record of 20.4% last month. The rate of youth unemployment in China has consistently been two or three times higher than the general population. Not a good sign.

The Federal Reserve yesterday raised the target for its benchmark interest rate by 0.25% to a new range of 5%-5.25%, the highest since September 2007. This will impact the value and stability of the U.S. dollar and stock markets in several ways.

During the only stable dollar eras of the last century, annual GDP growth averaged 4.9% from 1922-29, 4% from 1948-71, and 3.7% from 1983-2000.

In comparison, over the last two decades, a more volatile dollar saw average growth of only 1.9%. Had the dollar remained stable since 2000, with a steady 3.7% growth, the economy would be nearly 50% greater than it is today, and we probably would have avoided all these financial crises along the way.

Here are the latest developments in the cannabis sector over the past two weeks.

The bottom line: States continue to march forward with legalization, but the negative trends of price compression and higher financing costs weigh on weaker players. That will create acquisition opportunities for the stronger companies in the space.

By their nature, turnaround stocks involve a fair amount of risk. One way to help reduce that risk is to find out-of-favor stocks that offer high dividend yields. This puts hard cash in your pocket while you wait for the turnaround to take effect.

In this issue, we list six additional out-of-favor stocks that have high dividend yields which we believe are sustainable and also have turnaround potential: