by Louis Navellier
January 4, 2023
In the coming year or two, I expect traditional fossil fuel energy companies to continue to excel, rising to up to 30% of the S&P 500 in the upcoming years as technology stocks continue to shrink. Although I recommend Enphase Energy (ENPH) as well as Sociedad Quimica y Minera de Chile (SQM) that are prospering from the green revolution, the world cannot break away from fossil fuels anytime soon.
The Biden Administration released over 180 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) in 2022 and drained the SPR to its lowest level in four decades. This SPR release pushed crude oil prices lower while artificially boosting U.S. GDP growth by shrinking the U.S. trade deficit. In fact, almost all the third-quarter GDP growth was attributable to the SPR release! Obviously, the Biden Administration cannot deplete the SPR much more in 2023, especially with a new Republican-led House, so energy prices are expected to resurge in 2023, when the SPR can no longer be tapped.
Russia remains the wild card for commodity markets. The G7’s $60 price cap on Russian crude oil is expected to fail and Russia has refused to sell crude oil to any G7 nations. Due somewhat to the sanctions against Russian oil, Russia’s production is expected to decline 12% in 2023, which will likely put more upward pressure on crude oil prices. A cease fire agreement between Ukraine and Russia would be welcome this year, but so far remains elusive, so we are entering 2023 with continued uncertainty.
Russia on Tuesday officially banned the sale of crude oil and petroleum products to the G7 countries that imposed a $60 per barrel price cap on Russian crude oil. Hungary and other landlocked European Union (EU) nations are requesting exemptions from the G7 price caps on Russian crude oil. Price caps tend to fail, but in the interim, Russia’s ban on selling oil to the G7 will likely help to push oil prices higher.
Interestingly, the Financial Times reported that Western insurance companies are still covering crude oil shipments to China, India, and Turkey through December. However, under the G7 price cap agreement, Western insurers and logistics companies are only supposed to work with Russia if the buyers of crude oil are paying less than $60 per barrel. According to Kepler, a freight data and analytics company, from December 5th through December 25th, six tankers with Russia crude oil were headed to China, nine to India, and one to Turkey that were covered by Western insurance companies. Clearly, the implementation of the G7 $60 price cap and ban on Western insurers and logistics companies is not being fully enforced. Over time, sanctions and price caps tend to fail, and Russia is a master at circumventing price caps!
One thing that is certain is that the Fed desires to do whatever is necessary to squelch the high inflation they helped to cause. After the most aggressive series of rate hikes in decades, inflation is finally moderating. Whether or not the Fed can engineer a soft economic landing remains uncertain.
New Realities in Electricity Costs Cause EV Sales to Shrink
In other news last week, Tesla’s planned 8-day shutdown of its Shanghai plant is being extended through the end of January due apparently to rising Covid cases in China as well as slowing sales. The company now has sufficient inventory of its electric vehicles (EVs) and continues to offer discounts to try to sell its EVs amidst increasing competition in China. Furthermore, U.S. tax incentives to buy EVs have expired for Tesla in 2022, so in the U.S., Tesla is offering $7,500 discounts on Model 3s and Y EVs, plus 10,000 miles of free charging last month. The EV revolution may pick up as the inventory of EVs builds, since there is a growing inventory of EVs, so discounts as well as new 2023 tax incentives should help sell more EVs, as Tesla’s order backlog shrank from 476,000 in late July to 163,000 as of December 8th.
High electricity prices in Europe have caused EV sales to “go off track” according to Thomas Schmall, CEO of VW’s components division. Schmall also said that the North American market is “speeding a little bit faster than we expected in the last months.” The ultimate irony is that in countries with cheap electricity, from coal or hydroelectric, EV sales remain healthy. On the other hand, countries with expensive electricity due to expensive green energy sources, like wind, are suddenly hitting EV resistance as their electricity costs rise. EV sales accounted for 6.8% of VW Group’s global third-quarter sales.
Speaking of EVs, the world’s largest lithium producer, Albemarle, expects that lithium prices will remain high for several years due to countries mandating EVs in upcoming years. Since 2020, the price of lithium has soared more than 1,000% to almost $80,000 per ton. As a result, EVs are now largely luxury vehicles, since battery costs have risen dramatically as the cost of cobalt, lithium, and nickel have soared from strong battery demand. Albemarle said that worldwide production of lithium was only 300,000 tons annually back in 2019 and the production of lithium is now growing by 200,000 tons per year. However, new lithium facilities are producing lower grades of lithium, which is also keeping prices high. Overall, Albemarle produces 130,000 to 140,000 tons of lithium via its facilities in Australia, Chile, and Nevada.
The International Energy Agency (IEA) said that coal consumption is due to hit an all-time record in 2022, due somewhat to the fact that Germany reactivated many of its closed coal plants, plus all the new coal plants in China and India. During the first two weeks of December, Germany’s coal consumption rose 49% compared to a year ago. Interestingly, the IEA also said that neither hydrogen nor batteries were ready to be deployed at scale. An acute battery shortage due to the transition to EVs means that large battery storage facilities remain cost prohibitive, even though some battery storage facilities are being added in California. The real problem that Germany and many other European counties have are record high electricity rates, so there is no desire at this time to increase electric rates further with expensive battery or alternative solutions, so coal looks like the next potential winner.
Due to the cold wave after the “Siberian Bomb Cyclone” that disrupted air travel just before Christmas, most of the continental U.S. has been enveloped by cooler-than-normal temperatures as well as record snow in places like upstate New York. Despite warming weather around New Year’s weekend, the price of natural gas is expected to remain very firm due to strong seasonal demand in both Europe and the U.S.
Russian Deputy Prime Minister Alexander Novak told the state news agency TASS that natural gas production would decline 12% and exports would decline about 25%. Prime Minister Novak earlier said that G7 price caps would cause Russia to reduce its crude oil production by 5% to 7%, which works out to 500,000 to 700,000 barrels per day. As a result, I expect that both natural gas and crude oil prices will meander steadily higher in the New Year due to tight supplies.
The other thing to watch in the New Year is the analyst community. Often when the analyst community gets back from skiing and their Christmas vacations, they tend to update their fourth-quarter earnings announcements. I, for one, will be curious to see if the analyst community will be revising their earnings estimates higher or lower in the first half of January before fourth-quarter announcements commence. Outside of the energy sector, expectations for earnings remain very low due to difficult year-over-year comparisons, as well as a strong U.S. dollar impeding profits of multinational companies.
The Wall Street Journal had a great article showing that the world is suddenly awash in semiconductor chips. The chip glut is due largely to the fact that consumers are buying fewer electronic items like personal computers and cell phones. Interestingly, despite a near-term glut, semiconductor manufacturers are still expecting semiconductor chip sales to double by 2030 as the “internet of things” requires chips to be installed in more consumer devices. As a result, guidance from semiconductor chip manufacturers in upcoming months, especially after their fourth-quarter earnings announcements, will be very important.
Some Final “Mixed” Economic Indicators to Close 2022
Some final sales indicators are that MasterCard reported last week that retail sales rose 7.6% between November 1st to December 24th, compared to a year ago. Steep discounts and Black Friday sales aided the holiday sales increase. However, since inflation rose 8.5% in the past year, the 7.6% increase in holiday sales is still somewhat disappointing, since sales could not keep pace with the underlying inflation rate.
One key indicator – the ISM manufacturing index – is now signaling a recession after 30 straight months of expansion. The U.S. consumer remains surprisingly strong, but we are ending 2022 with persistent uncertainty, so recession fears are rampant. In my opinion, energy will remain the best oasis for investors.
Last Wednesday, the National Association of Realtors reported that pending home sales in November declined 4% compared to October. This was the sixth straight monthly decline and the lowest monthly home sales ever recorded, excluding the months immediately after the Covid pandemic commenced. In the past 12 months, pending home sales declined 37.8%. Hopefully, these weak home sales will show up in the Owner Equivalent Rent component in the Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) index, since that is the inflation component that the Fed is striving to contain.
And finally, the Labor Department on Thursday reported that unemployment claims rose to 225,000 in the latest week from a revised 216,000 in the previous week. Continuing unemployment claims increased to 1.710 million from a revised 1.669 million the previous week. Continuing unemployment claims have been steadily rising since October. However, unemployment claims are still too low to impact Fed policy, so a February 1st key interest rate hike remains likely due to rising Treasury bond yields last week.
Navellier & Associates owns Enphase Energy, Inc. (ENPH), Sociedad Quimica Y Minera De Chile S.A. (SQM), and Volkswagen Ag. (VWAGY), and a few accounts own Tesla (TSLA), per client request in managed accounts. Louis Navellier and his family own Enphase Energy, Inc. (ENPH), Sociedad Quimica Y Minera De Chile S.A. (SQM), and Volkswagen Ag. (VWAGY), via a Navellier managed account and Enphase Energy, Inc. (ENPH), in a personal account.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
My Top Market Prediction for 2023
Income Mail by Bryan Perry
Rally to Resume When Inflation Sinks to 1-Year T-Bill Yield
Growth Mail by Gary Alexander
Expect “Less of the Same” (Blessedly) in 2023
Global Mail by Ivan Martchev
M2 Growth Goes to Zero
Sector Spotlight by Jason Bodner
The Best Way to Predict the Future is to Help Create It
View Full Archive
Read Past Issues Here

Louis Navellier
CHIEF INVESTMENT OFFICER
Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Important 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 a 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.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.
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 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 holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and 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 every investor. 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. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.
ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:
- ETF shares may trade above or below their net asset value;
- An active trading market for an ETF’s shares may not develop or be maintained;
- The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
- The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
- Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.
Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.
Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.
This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.
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 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.
FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.