All it takes is three months to completely change the tone on Wall Street. In September, U.S. stocks were rolling, reaching all-time highs with no real turbulence in sight. Three months later, all three major indexes had tumbled close to 20%, and after an unprecedented Christmas Eve cratering, it seemed like we had officially entered a bear market. Now, three months later, that correction seems like a distant memory, with stocks continuing to rally and leading growth stocks hitting all-time highs. What should we expect from the next three months? I’ve compiled some of our best stock market tips from the past week.
What follows are excerpts from the most recent issues of three of our premium advisories: Cabot Growth Investor, Cabot Global Stocks Explorer, and Cabot Dividend Investor. I plucked from these three advisories to give you a variety of flavors, sampling stock market tips from the growth investing perspective, global perspective and more conservative, income investing perspective.
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Here’s what our Cabot analysts are advising right now:
3 Stock Market Tips
Mike Cintolo, Chief Analyst, Cabot Growth Investor
“If you could draw up a reaction to the selling of the past couple of weeks, the past few days would have been it, with the market basically levitating higher all week, including this morning’s pop. As we write, the S&P 500 is up 2.6% on the week, while the Nasdaq is up 3.5%.
“Obviously, the rebound this week is all to the good, but we don’t have a strong opinion of the market’s short-term future. A further move higher is certainly possible, as the underpinnings of the market remain strong—the intermediate- and (by our measures) longer-term trends are pointed up, almost no leading stocks have cracked (and many have popped to new highs) and we remain impressed with the general skepticism seen in many sentiment measures.
“That said, there are a lot of very short-term “non-confirmations” out there—while the S&P 500 and Nasdaq have nosed to new recovery highs, other major indexes (small caps, mid caps, NYSE Composite) have not, nor have the number of stocks hitting new highs. Plus, let’s not forget that we only dipped for a few days after a strong nine-plus week advance, so further hesitation wouldn’t be uncalled for.
“All of that is simply a way of saying that the path of the next couple of weeks is a bit of a coin flip. Further strength wouldn’t be surprising, but we wouldn’t bet against another wobble or two like we saw earlier this month (or possibly some rotation out of hot growth stocks and into other areas, which we’re seeing this morning). Given it all, it’s probably good to remain a bit choosy on the buy side, buying mostly on dips or after a brief rest period.
“But we don’t want to make too much of the short term. The big story here remains the fact that the market is likely relatively early in a new bull move that, if history is any guide, should last for many more months.
“Indeed, this week’s rebound only reinforces our bullish view—the longer the market goes without a major headache, the better the odds that this thrust off the lows (which is approaching three months) will lead to meaningfully higher prices down the road.
“All in all, the evidence remains bullish, so you should as well. At this point, we don’t advise jumping into things that have just had big runs (conversely, you can continue to take partial profits on some stocks that are sticking straight up in the air), but you should be holding most of your shares in strong performers and looking to add new leaders, preferably on pullbacks.”
Carl Delfeld, Chief Analyst, Cabot Global Stocks Explorer
“Week to week, it’s important to keep in mind why we as investors are interested in global emerging markets.
“In short, it’s growth. Economies with high growth rates fueling companies that are growing revenue and profits at a brisk pace. And when we can get growth at a value price—so much the better.
“But emerging markets come with a bit higher risk and volatility so we need to pay attention to this as well. Our Emerging Markets Timer helps us invest when emerging markets are in favor and build up some cash when they’re not.
“Taking partial profits when a recommendation does well and using trailing stop losses also helps lock in gains and minimize losses.
“Each of you is in a different situation with different time frames, risk tolerance and experience. In my recommendations and advice, I obviously put the best moneymaking advice out there, but it’s fine to tailor it to your personal situation.
“For example, I’ll let you know when a recommendation is more speculative and aggressive, which can be a signal to more conservative investors to invest a smaller amount or put in place a tighter trailing stop loss. Over time, I’ll also strive to blend into the portfolio some relatively conservative ideas to capture emerging growth such as multinationals that are trading at bargain prices, which will help the portfolio and provide plenty of ideas across the risk spectrum.
“Moving on to the macro front, there’s not much new this week. The U.S.-China trade talks continue and the deadline for closure has evaporated as President Trump signaled that the U.S. is in no hurry to come to an agreement.
“China’s industrial output grew 5.3% in the first two months of 2019—the slowest pace of expansion in 17 years. But investments picked up, the government fast-tracked more road and rail projects, retail sales rose 8.2% and tax cuts were announced. Uncertainty about China’s growth in 2019 is a headwind but our Emerging Market Timer is still positive so we remain constructive on the sector.”
Tom Hutchinson, Chief Analyst, Cabot Dividend Investor
“I believe the economy is stronger that most believe. Sure, it’s not as strong as it was a year ago, so it is technically slowing down. As a result, some economic reports are positive and some are negative. But there is still a solid level of growth that could continue for some time.
“That’s an important thing to remember because there is a lot of conflicting information out there. Prognosticators are always anxious to be the first on their block to predict the next downturn. When we are in the late stages of an economic cycle they come out of the woodwork. They’ve successfully predicted ten of the last three recessions.
“At the same time, things are getting increasingly political as we move close to the 2020 Presidential election. Some groups are incentivized to talk down the market and the economy while others are motivated to be overly positive. But don’t let all that throw you off the fact that things are still solid but not as good as last year.
“That said, there is increasing risk in the global economy. Europe is apparently gravitating back to its natural state of economic stagnation while facing risks of worsening conditions. China is a mystery; nobody even knows what’s really happening there. And it’s vulnerable to faltering trade negotiations. If things deteriorate overseas it could drag us down as well. I’ll be watching that closely.”
The Bottom Line
Now, if you want some stock picks to go with those stock market tips, you can subscribe to any one of our 12 investment advisories by clicking here. Whatever the next three months brings – good or bad – we’ll guide you through it. Our analysts helped their subscribers navigate the choppy market waters during the fourth-quarter 2018 market crash, going heavily to cash in their portfolios so as to prevent big losses. Now that the clouds have parted, each one of them has reloaded.
To learn what stocks they’re recommending now, click here.
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