by Louis Navellier

October 4, 2022

Last week, the 2-year Treasury rate rose above 4.3%, the 10-year Treasury rose above 3.9%, and mortgage rates topped 7%, their highest level in 20 years! These charts released by Ed Yardeni illustrated that the Fed, by reducing its balance sheet by $95 billion per month, has sent the 10-year rate substantially higher. The title of his report (“Oh No! The Fed Is Making Another Big Mistake!”) implies this is a horrible mistake.

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

Fortunately, on Wednesday, the Bank of England rode to our rescue when it implemented emergency actions due to a “material risk to UK financial stability” by suspending its program to sell gilts (British bonds). The Bank of England then said it would buy long-term bonds on “whatever scale is necessary” to promote financial stability. After the BoE announcement, 30-year bond yields fell by a full 1%, from 5% to 4%. Furthermore, bond yields from all around the world fell on the perception that other central banks would soon follow the Bank of England and implement more quantitative easing (i.e., bond buying). On Wednesday, 10-year U.S. Treasuries retreated from a peak of 3.964% to 3.7% and closed Friday at 3.8%.

Even though the Bank of England recently raised key interest rates 0.5% to 2.25%, traders now anticipate another 0.75% rate increase to 3%. The British media has been very critical of new Prime Minister Liz Truss’ proposed tax cuts – which also provide extensive relief for sky high electricity rates – but frankly if too many people cannot pay their utility bills, Britain will have a serious problem, and Prime Minister Truss must do something to stimulate economic growth. However, due to a plunging British pound that hit an all-time low to the U.S. dollar (at $1.0379), everything Britain imports is now more expensive, so the Bank of England will have to hike rates further to stabilize the pound and squelch soaring inflation.

Elections are taking place around the world this year, but the two key leadership positions are not open to democratic elections. The current leaders in China and Russia have become extremely authoritarian. I for one will be very interested to see if both Xi Jinping and Vladimir Putin dare to show up at the G20 meeting that is scheduled in Bali, Indonesia in mid-November. Interestingly, both Xi and Putin have been reluctant to travel due to their respective domestic problems. The world needs to prepare for potential leadership changes in Russia and China in upcoming years, since neither Xi or Putin are in total control of their respective citizens.

An emerging theory in China is that Xi Jinping’s “Covid Zero” lockdown policy in key provinces is mostly a cover for President Xi to squelch opposition after dispatching tanks to disrupt demonstrations by bank depositors who were upset that they could not withdraw their savings from the People’s Bank of China.

The Communist Party will meet in mid-October to select new leadership for the party’s Central Committee, the 25-person Politburo and the 7-person Politburo Standing Committee. President Xi Jinping is vying for an unprecedented third term after his predecessors stepped down after just two consecutive 5-year terms. It will be interesting to see if Xi can survive a vote of confidence from the Central Committee after several missteps.

News on Some of Our Stocks as We Approach Earnings Season

The Porsche IPO opened trading on the Frankfurt exchange last week and it was a big hit as the stock rose 4% above the IPO price after being oversubscribed by almost 2-to-1. For those of you who own Volkswagen AG (VWAGY), VW will spin off Porsche shares or cash in a special distribution on October 4th.

I think Porsche has the potential to reach Tesla-like valuations (now trading at 48 times 2023 earnings estimates), since it has record-high operating margins, and its 2023 Macan EV should be a top seller. Porsche is trading at about 15 times forecasted earnings vs. the 31 times forecasted 2023 earnings for Ferrari and 46 times earnings for Tesla, so there is plenty of appreciation potential for Porsche.

Our energy stocks firmed up last week, as Hurricane Ian curtailed crude oil production and refining in the Gulf of Mexico. Additionally, the Nordstream 1 pipeline was sabotaged (by parties unknown, so far), suffering a major leak in the Baltic Sea that is visible from the air, so Europe is now cut off from all Russian natural gas and panic is starting to set in. Thermostats will have to be turned down lower this winter, so it will be interesting to see what temperature the European Union (EU) will mandate.

Our average large-cap growth stock is now characterized by 64% annual sales growth and 474% annual earnings growth, so we’re excited about the upcoming earnings announcement season, beginning in mid-October. Furthermore, the analyst community has revised their consensus earnings estimate 22.3% higher in the past three months. Our average large-cap growth stock is now trading at only 9.8 times median trailing earnings and 7.3 median 2023 forecasted earnings. Furthermore, our average large-cap growth stock’s dividend has risen by 152% in the past year. Due to these spectacular fundamental characteristics, I expect our growth stocks to break out in the upcoming weeks and be a silver lining in the stock market.

As I go down the capitalization ladder, the price-to-earnings ratios get even lower. Many small and mid-capitalization stocks are more “domestic” and so they are not being impeded by a strong U.S. dollar. The big story during the third-quarter announcement season will be how many large multinational stocks are being impeded by a strong U.S. dollar, which just hit an all-time high against the British pound.

Navellier & Associates Inc. owns Volkswagen Ag. (VWAGY), in managed accounts and a few accounts own Tesla (TSLA), per client request in managed accounts.  Louis Navellier and his family own Volkswagen Ag. (VWAGY), via a Navellier managed account. He does not own Tesla (TSLA) personally.

Most U.S. Economic Statistics Say “No Recession in the Third Quarter”

The economic news last week came in better than most economists anticipated, so it will be interesting to see if some economists revise their GDP estimates higher. Last Tuesday, the Atlanta Fed left its third-quarter GDP estimate unchanged at an anemic (but positive) +0.3% annual pace, but on Friday the Atlanta Fed shocked economists with a giant leap to +2.4% on the last day of the quarter, even though Hurricane Ian is expected to hinder GDP growth by an estimated 0.3% in the third quarter and 0.1% in the fourth quarter.

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

Speaking of GDP, the Commerce Department made its third and final revision to second-quarter GDP on Thursday. According to traditional definitions, the U.S. was in a recession during the first half of 2022, since U.S. GDP contracted at a 0.6% annual pace in the second quarter after contracting in the first quarter as well.

Although Treasury Secretary Janet Yellen initially blamed inventory depletion for the second-quarter GDP contraction, she has been conspicuously silent recently. This is probably because Fed Chair Jerome Powell is  now being blamed for any recession, so the heat is off Yellen for now. Nonetheless, all this recession talk amidst higher interest rates basically insures a big change in Congress in the upcoming mid-term elections.

Last Tuesday, the Commerce Department announced that durable goods orders declined 0.2% in August, which is a negative number but much better than the economists’ consensus estimate of a 0.5% decrease. Vehicle orders rose 0.3% in August, while aircraft orders fell 18.5%, which put huge downward pressure on durable goods. Excluding the volatile transportation component, durable goods orders actually rose 0.2%.

The silver lining was that business spending on durable goods (“core” capital goods) rose 1.3% in August and a robust +9.7% in the past 12 months, which is an encouraging sign. New orders declined 0.9% in August, following a revised 0.1% drop in July, so that provides evidence that order backlogs are diminishing.

Also on Tuesday, the Conference Board reported that its consumer confidence index rose to a 5-month high of 108 in September, up from a revised 103.6 in August and substantially higher than economists’ consensus estimates of 104.6. Falling gasoline prices and a strong job market were cited as the primary reason that consumer confidence was better than economists expected. The “present situation” component, which is indicative of current business conditions, rose to 149.6 in September, up from 145.3 in August. The “consumer expectation” component rose to 80.3 in September, up from 75.8 in August, which bodes well for continued strong consumer spending. Overall, the surge in consumer confidence was a pleasant surprise.

The biggest surprise last week was that the Commerce Department announced on Tuesday that new home sales surged 28.8% to an annual pace of 685,000 in August, up from a revised 532,000 annual pace in July and substantially higher than economists’ consensus estimate of a 500,000 annual pace. This was the second largest monthly surge ever recorded, led by a 66.7% monthly surge in the Northeast. Median home prices declined to $436,800 in August, down from a record $458,200 set back in April. In the past 12 months, new home sales have declined 0.1% and are far below the peak 1.04 million annual sales pace in August 2020.

The Labor Department on Thursday announced that initial claims for unemployment declined to 193,000 in the latest week, down from a revised 209,000 in the previous week. Continuing unemployment claims declined to 1.347 million, down from a revised 1.376 in the previous week. Clearly, the labor market remains healthy, but Hurricane Ian is expected to distort next week’s unemployment statistics, at least temporarily.

Finally, the Commerce Department on Friday reported that personal income rose 0.4% in August vs. a revised 0.2% decline in July. The Fed’s favorite inflation indicator, namely, the Personal Consumption Expenditure (PCE) index, decelerated to a 6.2% annual pace in August. Unfortunately, the core PCE rose to a 4.9% annual pace in August, up from a 4.7% rate in July, so inflation is becoming more established.

Speaking of inflation, the European Union (EU) statistics agency on Friday announced that consumer prices have risen 10% in the past year, the highest rate since EU inflation statistics began. (There are longer inflation series for individual countries, and Germany said its inflation in September was the highest since late 1951!)  Higher energy prices and weak currencies that cause commodity inflation continue to torment the EU, so EU energy ministers are proceeding with plans to cap energy prices and tax energy companies on windfall profits, but I worry that might result in continued energy shortages.

All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.

Please see important disclosures below.

About The Author

Louis Navellier

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 or by requesting a copy by emailing 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.