by Louis Navellier

December 21, 2021

Although a federal judge overrode the Biden Administration’s ban on drilling on federal land, Biden’s advisors remain hostile to energy independence, so energy production within the U.S. has ebbed in 2021.

One unexpected consequence of the drilling ban is that many independent operators abandoned natural gas wells in the Permian Basin, especially in Southeastern New Mexico, so tons of methane and natural gas have needlessly escaped into the atmosphere, which is not what climate activists wanted.

Part of the proposed Build Back Better Act authorizes hundreds of millions of dollars to cap abandoned wells. It seems that the Energy Department could simply honor the federal judge’s ruling, reactivate these wells, stop the leakage, and help get energy prices lower, but I suppose you can’t change rigid ideologies.

The Biden Administration is also still allowing solar panels to be imported, despite the fact that they are largely made in Chinese slave labor camps by Uyghurs. Another interesting fact is that California proposed substantial changes to its solar energy incentive program last week that included higher monthly utility fees to cut “net energy metering” when utility customers sell excess electricity to the utility grid.

Although solar energy is required on all new homes in California, when the state reduces the electricity homeowners can sell back to the electric grid, existing customers may now install more Powerwalls, so that they can better utilize their excess electricity versus selling it back to the utilities at reduced rates.

Meanwhile, China is becoming increasingly isolated as it asks countries to break diplomatic ties with Taiwan. Although Nicaragua sided with China and cut its ties with Taiwan, Lithuania pulled its diplomats out of China after it strengthened ties with Taiwan. As China tries to wield its influence around the world, its domestic economic growth continues to decelerate in the wake of Evergrande defaults, which have helped to push property prices down for three consecutive months. According to China’s National Bureau of Statistics, retail sales decelerated to a 3.9% annual pace in November, below the expected 4.5% rate.

Complicating matters further, the Biden Administration “blacklisted” eight Chinese companies last week, including DJI (the largest commercial drone manufacturer), for suppressing Uyghur Muslim minorities.

The Positive Side of Inflation – Most Markets Are Up!

After we went to press last Tuesday morning, the Labor Department announced that the Producer Price Index (PPI) surged 0.8% (a 10% annual rate) in November. Wholesale food prices rose 1.2% and energy prices surged 2.6%. Excluding food, energy, and trade margins, the core PPI rose 0.7% in November, so it is no longer just related to higher food and energy prices. For example, the wholesale cost of goods rose 1.2% in November, while wholesale services rose 0.7%, so clearly inflation is no longer “transitory.”

In the past 12 months, the headline PPI and core PPI have risen 9.6% and 6.9%, respectively. Yikes!

The positive side of this inflation is that the bull markets in residential real estate and stocks remain the best way to protect yourself against inflation, so growth stocks and dividend growth stocks are expected to remain an oasis for investors. Since the market began to recover after its initial decline in March 2020, millions of new investors have opened brokerage accounts as these investors increasingly are turning to stocks to protect themselves against the highest inflation rates we’ve seen in 39 years (since 1982).

The net result is that 2021 has been a great year for most markets, but the financial media continue to try to scare investors away from stocks by pointing out that Elon Musk and other billionaires are selling a record number of shares. The bears are insinuating that if “smart money” is selling, then a stock market correction must be imminent. However, The Wall Street Journal pointed out that in the third quarter, stock buy-backs rose to $234.5 billion, an all-time record. This may explain why companies continue to post better-than-expected earnings, since stock buy-backs tend to boost the underlying earnings per share.

As far as a correction being “imminent,” we already had a 5% decline in the S&P 500 (intraday) between Thanksgiving week and December 3rd, when the stock market overreacted to the Covid-19 Omicron variant, as well as unnecessary fears of Fed tapering. NASDAQ fell almost 8% in the same time frame, then it successfully retested those December 3rd lows on Friday, December 17th. This retest occurred on light trading volume, which tells me that it should be safe to invest in the stock market, since most of the risk has been wrung out. As I have mentioned several times, the last week of the year (between Christmas and New Year’s) is an excellent time to invest, since most year-end tax selling has been exhausted.

Fortunately, the Treasury Department recently conducted successful Treasury securities auctions and although intermediate yields rose slightly, but briefly, the 10-year Treasury and other long bond yields remain remarkably stable. As I reported last week, the Treasury Department sold $36 billion in 10-year bonds, with foreign buyers accounting for just under 69% of all bidders. The bid-to-cover ratio was a very healthy 2.43, so the 10-year bond yield only rose slightly and has since fallen. Due to robust international demand for Treasury securities, the Fed will continue to taper and further reduce its quantitative easing.

As we close out 2021, the U.S. dollar remains very strong, as international investors increasingly turn to the U.S., since we have positive interest rates (versus flat-to-negative interest rates in Japan and most of Europe) and a strong currency. Our economy is also in better shape than Europe’s or Japan’s. The ISM service index is at a record high, and the ISM manufacturing index remains robust, so fourth-quarter GDP growth is shaping up to make 2022 a year for the record books! Since approximately half the sales for the S&P 500 are outside of the U.S., a strong U.S. dollar should help create record sales and boost earnings.

Looking forward to 2022, I expect that our growth stocks and dividend growth stocks will prosper. Why?

  • First, although year-over-year earnings comparisons will become more difficult in 2022, a narrower market is good news for us and bad news for the “index fund” crowd, since our stocks have traditionally prospered in a narrowing, more selective, stock market environment like this.
  • Second, the Fed will likely remain reasonably accommodative after winding down its quantitative easing by March and perhaps raising key interest rates, starting in March – but in a gradual manner.
  • Third, inflation will eventually decelerate, but it will likely remain above the Fed’s target rate through 2022. Inflation may fall under 3% by late 2022, which the stock market will likely celebrate.
  • Fourth, the leadership of both the House of Representatives and the Senate are expected to change due to the mid-term elections, so Wall Street will finally get the divided government that it craves.

Overall, I expect that our growth and dividend growth stocks will remain an oasis amidst the inflationary bubbles rolling through the U.S. and world economy. As other countries persist with their draconian lockdowns due to Covid-19, here in the U.S. lockdowns are no longer politically practical, since everyone who wants a vaccine has gotten one or can get one. For example, despite record hospitalizations in Michigan, the governor does not dare impose more lockdowns, since she is running for reelection. The simple fact of the matter is that the U.S. remains an oasis of relative freedom, compared to most of the rest of the world.

One other big change is that the pandemic accelerated technological change and boosted productivity in the U.S., so companies can now make more money with fewer workers. Investors can profit in artificial intelligence (with companies like Nvidia); cybersecurity (Crowdstrike and Fortinet); 5G (Alphabet, Cadence Design System, EPAM Systems, and Keysight Technologies); electric vehicles (Ford, Panasonic, and VW Group); and semiconductor industries (KLA Corporation and United Microelectronics). These and a few other companies are leading this new wave of higher productivity.

As investors, we have a lot to be excited about, and I promise to keep recommending the crème de la crème of available stocks. I am immensely proud that our growth and dividend growth stocks represent a critical path to prosperity and the independence that successful investors enjoy!

Navellier & Associates owns Nvidia (NVDA), Crowdstrike Holdings (CRWD), Fortinet Inc. (FTNT), Alphabet (GOOGL), Cadence Design System (CDNS), EPAM Systems (EPAM), Keysight Technologies, (KEYS), Ford, (F), Panasonic Corp (PCRFY), VW Group (VWAGY),  KLA Corporation (KLAC), and United Microelectronics (UMC), in managed accounts. Louie Navellier and his family personally own Nvidia (NVDA), Alphabet (GOOGL), Cadence Design System (CDNS), EPAM Systems (EPAM), Keysight Technologies, (KEYS), Ford, (F), Panasonic Corp (PCRFY), VW Group (VWAGY), and United Microelectronics (UMC), via a Navellier managed account, but do not own Crowdstrike Holdings (CRWD), KLA Corporation (KLAC), or Fortinet Inc. (FTNT),

Retail Sales Disappointed – But the Fed is Still Accelerating the “Taper”

Last Wednesday, the Commerce Department announced that retail sales rose just 0.3% in November, substantially below economists’ consensus estimate of a 0.8% increase. Electronics & appliance store sales declined 4.6%, while gas station sales rose 1.7%. General merchandise store sales declined 1.2%, led by a 5.4% drop in department store sales. Non-store (online) retailers were unchanged. Sporting goods store sales rose 1.3% and were likely boosted by gun and ammunition sales. Excluding gasoline sales, retail sales rose only 0.1% in November, but over the past 12 months, retail sales have risen 16.2%.

Overall, the November retail sales report was very disappointing and will undoubtedly lead to downward fourth-quarter GDP revisions. In fact, the Atlanta Fed on Wednesday reduced its fourth-quarter GDP estimate to a 7.0% annual pace, down from its previous estimate of an 8.7% annual pace. It appears that higher gas prices are “zapping” consumer buying power and may be impacting consumer sentiment.

The other big news on Wednesday was that the Federal Open Market Committee (FOMC) statement was surprisingly dovish in the wake of that morning’s disappointing retail sales report. Specifically, even though the FOMC statement implied that there would be three key interest rates hikes of 0.25% each for the federal funds rate in 2022, these rate hikes would not commence until the Fed ended its tapering.

The Labor Department on Thursday announced that new claims for unemployment in the latest week rose to 206,000, compared to a revised 188,000 in the previous week. Continuing unemployment claims fell to 1.845 million, vs. a revised 1.999 million in the previous week. New unemployment claims remain near a 52-year low, and the fact that continuing unemployment claims keep declining is very good news. In my opinion, the Fed has fulfilled its unemployment mandate and can now concentrate on fighting inflation.

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
2022 Could Be “Like 2018 All Over Again”

Sector Spotlight by Jason Bodner
We’re Near “Oversold,” Ready for a Santa Claus Rally

View Full Archive
Read Past Issues Here

About The Author

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.