by Louis Navellier

November 1, 2022

The Commerce Department shocked many economists (and certainly pleased the Biden Administration) on Thursday when they announced the preliminary estimate for third-quarter GDP growth at a 2.6% annual pace following negative growth in the first two quarters. What I find most amazing is that virtually all of the third-quarter GDP growth was attributable to a lower trade deficit that added 2.77% to GDP growth, and most of that came from higher petroleum exports, due largely to one million barrels per day being released from the Strategic Petroleum Reserve (SPR), which, as its name implies, is only to be used for national emergencies, not to lower the price of gasoline at the pump right before a mid-term election.

So, this bloated GDP figure is mostly an artificial number ginned up to get gas prices down before an election. Without the reduced trade deficit, due largely to oil exports, GDP growth would be close to zero.

Speaking of the SPR, the Biden Administration offered to begin refilling the SPR when (if) crude oil prices fall to between $67 and $72 per barrel. That may never happen if demand increases at the current rate. The SPR can hold 714 million barrels of crude oil, but the SPR now stands at just 405 million barrels, a 38-year low. Furthermore, the Biden Administration’s criticism of the crude oil industry’s desire to return any excess profits to its shareholders via dividends has raised the public’s mistrust level with Big Energy.

This kind of bias against fossil fuels in favor of ESG once drove energy stocks down to less than 2% of the S&P 500’s capitalization a year ago. Now, energy stocks are the best performing sector and have risen to approximately 6% of the S&P 500. In two to three years, I expect energy stocks will soar to 30% of the S&P 500 and appreciate 100% per year for the next couple of years! Why am I so bullish?  Primarily because the strategy of releasing those million barrels per day from the SPR cannot continue much longer and crude oil demand will likely pick up in the spring, so $120 per barrel crude oil is possible next spring.

Just two years ago, fossil fuels represented 80% of worldwide energy production, and that was thought to be too high, hence the push to “green” or “clean” energy. That has backfired. This year, due largely to the surging demand for coal in China, Europe, Indonesia, India, and the U.S., fossil fuels are expected to rise to 84% of worldwide energy production. Europe has proven that ESG polices are an expensive failure, since it just causes electricity prices to soar! These misguided policies are pushing Europe into recession.

Europe is already in recession. S&P Global’s composite purchasing managers index (PMI) for eurozone nations declined to 47.1 in October, down from 48.1 in September. This is the fourth consecutive month the index has been below 50, signaling contraction. Fuel rationing is very possible this winter in Europe if it becomes too cold, so the eurozone PMI could fall further in winter months. These recession fears are causing government bond yields in Europe to decline, which should help U.S. yields to moderate as well.

America is Not in Recession Yet – Just a Recession in Confidence

The Conference Board announced on Tuesday that its consumer confidence index declined sharply to 102.5 in October, down from 107.8 in September. The components of the consumer confidence index were not very encouraging: The “present situation” component declined to 138.9 in October (down from 150.2 in September) and the “expectations” component slipped to 78.1 in October (down from 79.5 in September). The big (11+ point) drop in the present situation component bodes poorly for fourth-quarter GDP growth, so an economic deceleration is likely underway, but not yet a measurable recession.

One reason that consumers may be so moody is that home prices are declining. The S&P CoreLogic Case-Shiller National Home Price index declined 1.1% in August, the second straight monthly decline. The Case-Shiller index is still up 13% in the past 12 months. However, some previously hot housing markets have cooled off: San Francisco home prices declined 4.3% in August, while Seattle prices slipped 3.9%. In the past 12 months, median home prices have risen 8.4% to $384,800 according to the National Association of Home Builders, but high mortgage rates near 7% are expected to hinder future price gains.

The Commerce Department on Wednesday announced that new home sales have declined 17.6% in the past 12 months. Interestingly, the median price of new homes sold in September rose to $470,600, up from $436,800 in August, so it appears that the more expensive single-family homes are selling more than multi-family homes. In the past 12 months, new home prices have risen 13.9%. Mortgage applications have fallen 42% in the latest week, so it seems that home sales volume is expected to slow due to higher rates.

In summary, consumers remain resilient, consumer confidence has been consistently waning, and higher interest rates are hindering home sales as well as other interest rate-sensitive parts of the U.S. economy.

The Skies Darken in Europe – As Winter Approaches

Speaking of interest rates, the European Central Bank (ECB) on Thursday raised its key rate by 0.75% to 1.5%, the highest rate since 2009. Both French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni were critical of the ECB raising these key rates, but the ECB remains behind other central banks, and is desperately trying to catch up. In the wake of a weak eurozone PMI in the past four months, the eurozone is almost certainly in recession, so the ECB criticism from Macron and Meloni may escalate.

The inflation statistics in Europe are truly shocking, so the ECB has its hands full, especially as political criticism mounts. Britain’s new Prime Minister, Rishi Sunak, on Tuesday stated that Britain “is facing a profound economic crisis.” Sunak, who is the third prime minister in just the past two months, said that he would prioritize “economic stability and confidence,” which “will mean difficult decisions to come.”

Prime Minister Sunak has a Stanford MBA and a home in Santa Monica, California. He is very smart and wealthy (even richer than King Charles), so it will be interesting to see if the average person in Britain can relate to him. Still, considering Britain’s dire fiscal state, with an erratic government bond market, Sunak’s expertise, gained at Goldman Sachs and a hedge fund, may be the right skills for these times.

Earnings Continue to Be Strong for Most of Our Stocks

Last week was a great week so for most of our stocks’ earnings announcements, with stocks like Archer Daniels Midland (ADM) and Enphase Energy (ENPH) beating on sales, earnings, and guiding higher.

However, mega-stocks like (AMZN), Google (GOOG), and Meta Platforms (META) all reported disappointing sales and earnings. Additionally, Microsoft (MSFT) and Texas Instruments (TXN) both beat on their sales and earnings but lowered their respective guidance. As a result, technology stocks remain very nervous, and a leadership change is underway. As I have said on some of my podcasts, it is now every stock for itself, and the stock market is expected to get narrower in the upcoming weeks.

Although electric vehicles are causing “sticker shock” for car buyers in the U.S. and Europe, Tesla cut the prices of its Model Y and 3 models in China as much as 9.4% due to lower material costs in China. Interestingly, the Chinese-made vehicles in Shanghai largely utilize cheaper iron phosphate batteries, while U.S.-made Tesla vehicles utilize more expensive lithium-ion batteries. Increasing competition in China for EVs was also likely a factor behind Tesla’s price cut, so while EV prices are rising around the world due to high prices for lithium, nickel, and cobalt in lithium-ion batteries, Tesla is either about to capture more market share and/or sacrifice its lucrative profits from its Shanghai manufacturing plant.

I should explain that Wall Street is dominated by “tracking managers” who must not over-allocate too much to any industry in the S&P 500, since most money managers must have a high correlation (R2) to their respective benchmarks. I had an interesting call last week with a prospective client where I had to explain that I could not qualify for most investment platforms, since my 60% weight in energy stocks is literally 10 times that of the S&P 500. Most money management firms do not allow managers to be overweight more than 2 to 1, so the maximum energy weight in a tracking portfolio would be just 12%.

The reason that I am so confident that energy stocks will reach a 30% weight in the S&P 500, up from approximately 6% currently, is because the tracking manager crowd will be systematically forced to buy more energy stocks as leading technology stocks falter (e.g.,, Google, Meta Platforms, Microsoft, etc.), while leading energy stocks announce great earnings and continue to steadily rise.

Just to put everything in perspective, energy was less than 2% of the S&P a year ago, while technology was about 48%. I predict that by early 2025, energy stocks will be 30% of the S&P 500 and tech stocks will fall to about 32%. In other words, the tracking managers will be systematically buying energy stocks and be trimming technology stocks as the sector weights in the S&P 500 change for the next few years!

Navellier & Associates owns Archer-Daniels-Midland Co.(ADM), Enphase Energy, Inc.(ENPH), Amazon.Com Inc. (AMZN), Microsoft Corp. (MSFT), Meta Platforms (META), Texas Instruments Inc. (TXN),  and a few accounts own Tesla (TSLA), per client request in managed accounts.  Louis Navellier and his family own Archer-Daniels-Midland Co.(ADM), Enphase Energy, Inc.(ENPH), Amazon.Com Inc. (AMZN), Microsoft Corp. (MSFT), Meta Platforms (META), Texas Instruments Inc. (TXN), via a Navellier managed account, and Enphase Energy, Inc. (ENPH), and Amazon.Com Inc. (AMZN), in a personal account. He does not own Tesla (TSLA) personally.

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

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
Bonds Still Hold the Keys to the Rebound

Sector Spotlight by Jason Bodner
How Do We Value Beaten-Down Stocks?

View Full Archive
Read Past Issues Here

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.