Attention Investors – Prepare for Blastoff
I hope you had a wonderful Thanksgiving. I spent the afternoon with about 30 family members at my brother’s house. I ate plenty of wonderful food and appreciated the chance to spend time with loved ones from four generations of family.
Thanksgiving also was a nice chance for me to step back a bit. I am enormously blessed and have a great deal to be thankful for in my life. I hope you and your loved ones are similarly blessed. Of course, not everything in my life is perfect but the good far outweighs the bad and for that I am thankful.
While the past two years have not been the most fun for investors like you and me, if you step back a bit, you’ll see why we at Cabot remain so optimistic about the market.
The following charts show the last 30 years for the S&P, the NASDAQ, and the Dow Jones Industrial Average.
S&P 500
NASDAQ
Dow Jones Industrial Average
As you can see, all three charts are very similar and show enormous growth over three decades with three substantial corrections – when the dot-com bubble burst in the early 2000s, the financial meltdown of 2008/2009, and the correction of 2022 after the overheating driven by a flood of inexpensive money in the first two years of the pandemic.
They also all share the very brief pullback in March of 2020 immediately followed by a big bounce through the end of 2021 when all three show the market stalled.
And most importantly you can also see we are back now on the trajectory we had been on prior to the pandemic. That is not a guarantee of future market performance of course. But, in the long run, the stock market goes up and conditions are lining up to break out of the choppiness and produce some real growth. That’s why we remain optimistic about the market.
To further reinforce my optimism, I’ll add a few timely notes from my colleague Michael Brush, Chief Analyst of our Cabot Cannabis Investor and columnist for MarketWatch, who shared his thoughts with me.
I would particularly emphasize his comments on improving productivity which ultimately drives higher wages, higher standards of living, and greater profits in the stock market:
“Investors are realizing we can have tamed inflation without recession.
“We are in the midst of an ongoing productivity boom. Almost no one is talking about this, but it creates several positives for stocks. It caps inflation (companies feel less need to pass along higher costs). It boosts profitability, which is good for stocks. Real wages move in synch with productivity gains, as Ed Yardeni pointed out in his presentation this morning. So, wage gains will be strong, which will support consumer spending.
“Productivity growth also creates GDP growth. I believe productivity gains will continue because capital spending and employment are so strong. Companies spend more on capex where the labor market is tight. They are also doing so because of the re-shoring of supply chains.
“Consumer spending is strong, as we just saw with Black Friday sales.
“The jobs market is strong.
“Hezbollah and Iran have signaled they do not want to expand the Israeli-Hamas war into a broader conflict. China’s economy is in trouble, which limits its desire for foreign military entanglements.”
It all adds up to indicate a very bright and profitable season ahead. As I said, we have a lot to be thankful for.
For More on This: Available on Demand
Is the Bull Market Back? – Cabot Street Check podcast from November 17, featuring conversation with Cabot Analysts Mike Cintolo and Jacob Mintz.
Mastering Today’s Market: 4 Experts, 4 Top Picks, and a Wealth of Wisdom – Webinar featuring Cabot Analysts Mike Cintolo, Tyler Laundon, Tom Hutchinson, and Bruce Kaser
Noteworthy in November
Our early-stage investing expert Tyler Laundon had a couple of nice wins this past month. In Cabot Small-Cap Confidential, he closed out his position in DUOL with a handsome 39% gain. And for his Cabot Early Opportunities subscribers, he closed out their position in ATI with a 15% gain after just two weeks.
On the options trading side, Andy Crowder, Chief Analyst for the Cabot Options Institute has closed his 61st positive trade (out of 72, or 85%) for a total return of 123.7% for his Income Trader service since it launched 18 months ago.
New Best Stocks Report – Get It Free Now
We have just released 5 Best Stocks to Buy in December featuring five strong momentum stocks to buy right now. This concise report is by our Chief Investment Strategist Mike Cintolo, Chief Analyst of Cabot Top Ten Trader and our flagship Cabot Growth Investor. You can download the report for free.
Finally, whatever you choose to celebrate at this special time of year, I wish you the very best.
For your investing success,
Ed
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