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We appear to be at a major turning point, a changing of the guard, if you will, and if you don’t heed the market’s message, you risk discovering that it has taken some of your hard-earned money. The fact is, most leaders of the last bull market are toast. Google is 37% off its high. Apple is down 37%, too. So what’s working? Two sectors.

SNaC stands for Story, Numbers and Chart, and it’s the method I use to pick stocks for the Cabot China & Emerging Markets Report. There’s nothing complicated about it, but it can be very powerful. Just because it’s simple, that doesn’t mean it’s easy to do, any more than the simplicity of “exercise more and eat less” makes that particular prescription easy. Here are the basic principles.

Given all that’s gone on in the market during the past couple of weeks, we thought it best to just get to the heart of what is on investors’ minds. In the following interview, I asked Cabot’s V.P. of Investments, Mike Cintolo, for his thoughts on the market, what scenarios he sees potentially playing out and, of course, his general recommendations for what to do now.

Last year, I wrote about my former life as a newspaper employee and what I think about the hurting business. A lot has changed since then, with several newspapers shutting down operations (or threatening to), including the Rocky Mountain News and the Seattle Post-Intelligencer, and others laying off even more employees as revenues continue to plummet. But the question remains: Can newspapers be saved?

Imagine a place where no one owns a car and everyone walks, rides their bikes or takes public transportation to work, to the store, to school or anywhere else they need to go. No, this isn’t some Star Trek-like fantasy world, it’s Vauban, Germany, a planned community where cars are largely banned in favor of other modes of transportation. A New York Times article this week detailed the particulars of this forward-thinking community; where a tram runs through the center of town, shops and houses are mixed together so no one has to travel far to do the shopping and people embrace biking and walking as primary means of travel.

Forecasts were all gloom and doom for Black Friday, with the media predicting a huge pullback in consumer spending. But on Monday, numbers were released showing that shoppers had actually increased their spending over the same period last year. Many media outlets are still predicting less shopping in the weeks before the holidays and spending was way down leading up to Black Friday, meaning the boost may not do much to help ailing retailers.

A team of reporters from Reuters calculated how much the world’s investment banks had disclosed writing down from derivatives in the past year, from the third quarter of 2007 through the second quarter in 2008, ending July 31. The total? $404 billion. In just four quarters, Wall Street wiped out its previous 10 years of profits. Even the airlines aren’t that bad.

Today’s note includes earnings updates, ratings changes and the podcast.

I recently had the opportunity to talk to one of ours editors who you don’t hear from regularly in Cabot Wealth Advisory, Thomas Garrity, editor of Cabot Small-Cap Confidential. Today I’ve got a Q&A to share with you about why Tom prefers to invest in small-caps, what he thinks the best investment strategy is now and in the long-term. I hope you enjoy it! (Interesting side note: The Russell 2000 index of small-cap stocks pushed above the 50-day moving average on Wednesday--the first time since the market collapse began in September.)

So far, I like 2023 a whole lot better than last year. At midday on Monday, the S&P 500 is up 3.7% and the Nasdaq is 4.5% higher so far this year. And it hasn’t even been five full trading days yet. Later this week, the December CPI number will come out, on Thursday. CPI is expected to be 6.6%, versus 7.1% in November. Assuming the number comes in at or better than expected, it could be very positive for the market. Falling inflation means the Fed won’t have to be as aggressive and investors could start sniffing out an end to this inflation/Fed conundrum later in the year.

It been a good start to the year, with the S&P 500 up over 4%. There is optimism that the Fed will lose its hawkish nerve as inflation falls and the economy turns south. Inflation was lower again in December, with CPI of 6.6% versus 7.1% in November and 9.1% in June. At the same time the economy is weakening, and most economists are predicting recession this year. Since markets tend to anticipate six to nine months into the future, it might not be that long until investors start sniffing out the end of the inflation/Fed conundrum and past the recession into a recovery.

The rally sputtered. But it hasn’t reversed. That’s because there are reasons for both optimism and caution.

There is a growing perception that the problems responsible for this bear market have peaked. Inflation has been receding and the Fed might be less aggressive going forward. The market tends to anticipate six to nine months into the future, and it sees lower inflation and the Fed done hiking rates.

It’s a furious rally. The market is on fire. Last week’s inflation report ignited a surge that might last longer. Let the good times roll (for now).


October inflation numbers were reported last week and both top-line CPI and core inflation numbers were lower than expected. It reignited hope among investors that inflation has peaked and is on the decline and the Fed will stop raising rates sooner than previously expected.