June 11, 2019

A long-forgotten phrase popped into my head this morning: “Yellow dog journalism.” I can still see my history teacher’s beard when he taught us that term. I sat in class wondering why on earth I ever had to memorize it. But things really do have a way of coming full circle. When I searched out the origin of the term, it dawned on me that there was Fake News in the 19th century. It was called “yellow dog journalism, defined as “the term for journalism and associated newspapers that present little or no legitimate well-researched news while instead using eye-catching headlines for increased sales.”

Frank Luther Mott, a 1939 Pulitzer Prize winner for his history of magazines identifies yellow journalism based on these five characteristics:

1. Scare headlines in huge print, often with minor news events.
2. Lavish use of pictures or imaginary drawings.
3. Use of faked interviews, misleading headlines, pseudoscience, and a parade of false learning from so-called experts.
4. Emphasis on full-color Sunday supplements, usually with comic strips.
5. Dramatic sympathy for the “underdog” against the system.

Sound familiar?

Don’t get me wrong – the news is essential and some of it is legitimate, but if it seems as if I’m beating up on the news media relentlessly, it’s because I have. There’s a reason: They deserve it. The investing “headline risk” has been huge for years now. Normal-level stories get inflated into life-or-death fear campaigns, and small whispers of hopes of good news can set the market on a major bull run.

Two examples:

1. The trade war story vaporized billions of dollars in equity value in May. We read plenty of opinions on why the trade war will derail life as we know it, but if you want to find a more moderate view, you really need to dig. I found one “think piece” buried deeply at NBC News: “Trade War? Try trade tiff. Trump’s Mexico and China tariffs aren’t crippling the economy, or farmers.” It echoes many of my thoughts about the media-overblown situation over tariffs.

2. Fed Chairman Jerome Powell basically said that the Fed is willing to do whatever it takes to stimulate growth. This rippled into rumors of a rate cut, which sent markets soaring last week.

Bill Lumbergh is a fictional character in “Office Space” (pictured above). Apparently, everyone got his memo to “Sell in May and go away” because the market had its worst May since 2010, with the Dow off 6.7%, the S&P 500 off 6.6%, and NASDAQ tumbling a gut-wrenching 8.7%. Echoing December, ETF selling spiked at the recent trough of the market – a classic sign that Mom and Pop sold out at the bottom.

Equities were “Tweeted into a Tailspin” in May

May marked the largest monthly outflow in history for equity ETFs, which reached a record $19 billion, according to a State Street Global Advisors Report. As money flew out of stocks, they ran into fixed income ETFs. Matthew Bartolini said, “Global equities were tweeted into a tailspin.” I couldn’t have said it better! Financials, Tech, Industrials, Materials, and Energy saw the biggest ETF outflows in May.

But my, what a difference a week makes. That was the last week of May, but in the first week of June, the smart money wasn’t selling. In fact, we saw verifiable buying. First let’s look at the sector tables:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

That is juicy! The Materials sector index exploded more than 9% last week! Semiconductors saw a pop after weeks of blood. Value and blue chips outperformed, but growth still surged.

Here’s what happened under the surface with unusual institutional buying and selling:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Our data showed exceptional buying. We had tons of “trips” (a stock tripping our model for big volume and volatility but not necessarily making a buy or sell signal.) This came with big up days after many down days and a falling ratio. We examined what that might mean for the near future and it was bullish.

Check the full report here.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The bears are still out there, but I see a different story. Many growth stocks are showing buying…that’s bullish. The Information Technology sector is on sale. Many fantastic stocks got hosed in May. The technical distribution pushed the sector down to #2 in terms of our top-rated sectors. Utilities took over with weak fundamentals and strong technicals. Infotech was the opposite.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

U.S. equities are the place to be. Global equity markets face much uncertainty, but the U.S. is the oasis. We have a strong dollar, strong sales and earnings growth, high profits, low taxes, and a strong economy.

Aristotle said, “It is during our darkest moments that we must focus to see the light.” When the market gets bearish and the news makes you sick, it’s probably a good time to focus on the data and get your shopping lists ready. I mean, Aristotle is bullish!

About The Author

Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

Disclosures

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report.

Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation of any offer to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for you. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Results presented include the reinvestment of all dividends and other earnings.

Past performance is no indication of future results.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not intended or written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE: The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

Marketmail Archives